Understanding Mortgage Types

Mortgage Options Explained

There are many mortgage options available to Arizona buyers. Understanding the differences can help you choose the best one for your situation and save thousands over the life of your loan.

Fixed-Rate Mortgages

With a fixed-rate mortgage, your interest rate stays the same throughout the loan term, providing predictable monthly payments. Available in 10, 15, 20, and 30-year terms. A 30-year fixed is the most popular choice, offering the lowest monthly payment. A 15-year fixed has higher monthly payments but dramatically lower total interest paid — often saving over $100,000 on a typical Phoenix home.

Adjustable-Rate Mortgages (ARM)

ARMs typically start with a lower rate that adjusts periodically after an initial fixed period. A 5/1 ARM offers a fixed rate for 5 years, then adjusts annually. ARMs can be a good choice if you plan to sell or refinance within the initial fixed period. In a rising rate environment, however, they carry more risk.

FHA Loans

FHA loans are insured by the Federal Housing Administration and designed for buyers who may not qualify for conventional financing. Key benefits: down payments as low as 3.5%, credit scores as low as 580, and competitive interest rates. The trade-off is mandatory mortgage insurance (MIP) for the life of the loan. In the Phoenix market, FHA loan limits are currently around $530,000.

VA Loans

Veterans, active military, and eligible surviving spouses may qualify for VA loans with zero down payment, no private mortgage insurance, and competitive interest rates. With the large military presence in Arizona (Luke Air Force Base, Fort Huachuca, Davis-Monthan AFB), VA loans are a popular choice in the Phoenix metro.

USDA Loans

For homes in eligible rural areas around the Phoenix metro (parts of Maricopa, Pinal, and surrounding counties), USDA loans offer zero down payment and reduced mortgage insurance. Income limits apply, typically 115% of the area median income.

Jumbo Loans

For homes exceeding conforming loan limits (currently around $766,550 in Maricopa County), jumbo loans provide financing for luxury properties. These typically require larger down payments (10-20%), stronger credit scores (700+), and more reserves.

Arizona-Specific Programs

The Arizona Housing Finance Authority offers several programs including the Home Plus program (up to 5% DPA), the HOME program for down payment and closing cost assistance, and special programs for public servants like teachers, first responders, and healthcare workers.