Quick Answer: To qualify for a conventional loan in Arizona, you typically need a 620+ credit score, 3-20% down payment, debt-to-income ratio under 50%, stable employment history, and sufficient income documentation.
Understanding Conventional Loan Requirements
Conventional loans are mortgages not insured by the federal government. They're governed by guidelines from Fannie Mae and Freddie Mac, offering flexible requirements that can work in your favor if you have good credit.
This guide covers everything you need to know to qualify for a conventional mortgage in Arizona.
Requirements at a Glance
Credit Score
620+
700+ for best rates
Down Payment
3-20%
As low as 3%
DTI Ratio
≤50%
Maximum allowed
Employment
2 Years
Preferred history
Credit Score Requirements
Your credit score significantly impacts your approval odds and interest rate. Here's how different score ranges affect your loan:
760-850: Excellent
Lowest rates, 3% down available
Best Rates
700-759: Very Good
Competitive rates, flexible terms
Great Rates
660-699: Good
Slightly higher rates, 5%+ down recommended
Good Rates
620-659: Minimum
Higher rates, 10%+ down recommended
Higher Rates
Below 620
Consider FHA loans instead
May Not Qualify
Benefits of Good Credit
- • Lower interest rates (save thousands)
- • 3% down payment options
- • Lower PMI costs
- • Faster approval process
- • Higher loan amounts
Improving Your Score
- • Pay all bills on time
- • Keep credit card balances below 30%
- • Don't close old credit accounts
- • Dispute credit report errors
- • Avoid new credit inquiries
Down Payment Requirements
Conventional loans offer flexible down payment options from 3% to 20%+:
3%
Minimum Down
- • HomeReady/Home Possible programs
- • 620+ credit score required
- • PMI required
- • Great for first-time buyers
5-19%
Mid-Range
- • Lower PMI costs
- • Better interest rates
- • More equity from start
- • Still requires PMI
20%+
No PMI
- • NO mortgage insurance
- • Lowest interest rates
- • Strong negotiating position
- • Lower monthly payments
💡 Down Payment Strategy
While 20% eliminates PMI, 3-5% down preserves cash for emergencies and improvements. You can always pay extra toward principal or refinance later to remove PMI.
Debt-to-Income Ratio Requirements
Your DTI ratio compares monthly debt payments to gross monthly income:
Front-End DTI (Housing)
Housing payment ÷ Gross income
PITI Payment
÷
Gross Monthly Income
= Front-End DTI
Maximum: 28-43%
Back-End DTI (Total)
All debts ÷ Gross income
PITI + All Debts
÷
Gross Monthly Income
= Back-End DTI
Maximum: 43-50%
Example Calculation
Monthly Income & Debts:
Gross Income: $6,000
Mortgage Payment (PITI): $1,800
Car Payment: $350
Student Loan: $200
Credit Cards: $50
DTI Calculation:
Front-End: $1,800 ÷ $6,000 = 30%
Back-End: $2,400 ÷ $6,000 = 40%
✓ QUALIFIES
Employment & Income Requirements
W-2 Employees
Preferred: 2+ years same employer
Documents Needed:
- • Last 2 years W-2s
- • Last 2 years tax returns
- • Last 30 days pay stubs
- • Employment verification
Self-Employed
Required: 2+ years self-employment
Documents Needed:
- • Last 2 years personal returns
- • Last 2 years business returns
- • YTD P&L statement
- • Business license
Commission/Bonus
Required: 2+ years receiving
Documents Needed:
- • Last 2 years W-2s
- • Last 2 years tax returns
- • YTD pay stubs
- • Employment verification
Property Requirements
Eligible Property Types
- • Single-family homes
- • Approved condominiums
- • Townhouses
- • 2-4 unit properties
- • PUDs
- • Manufactured homes (on foundation)
Property Condition
- • Must be safe and sound
- • Roof in good condition
- • Working HVAC systems
- • Functional plumbing/electrical
- • No major structural issues
- • Appraisal required
Private Mortgage Insurance (PMI)
PMI is required when putting down less than 20%:
PMI Cost Estimates
3-5% Down
PMI: 0.75-1.05% annually
~$188-263/month on $300k loan
10-15% Down
PMI: 0.35-0.65% annually
~$88-163/month on $300k loan
How to Remove PMI
Automatic at 78% LTV
Based on payment schedule
Request at 80% LTV
May require new appraisal
Refinance
When you have 20%+ equity
Ready to Get Pre-Approved?
See if you qualify for a conventional loan in Arizona