Arizona is one of the most beautiful and nature-rich states to live in when it comes to the US. Having so much draw can create price surges on housing depending on the location within the state. As prices get higher, some listings will need a jumbo loan in order to borrow the full amount needed.
Jumbo loans are often the solution in these types of scenarios. A jumbo loan or mortgage is a conventional private loan through a lender with higher loan limits compared to conforming loans offered through government agencies. Groups such as Fannie Mae and Freddie Mac are government enterprises and while that comes with government-backed loans, it restricts the amount borrowed based on median prices for single-family homes.
Why Do Some Loans Have Limits?
The higher the amount of a loan is, the more risk a lender takes on by providing it. Conforming loans will always revolve around housing costs for that specific area and the limit is capped at what the analysts for each agency determine is the best balance of risk and loan amount limits. Once these limits are surpassed, you’re no longer eligible for a conforming loan and must utilize a different lending solution.
Finding Conforming Loan Limits
The regulatory body that implements conforming loan limits is the Federal Housing Finance Agency, better known as the FHFA. The team at the FHFA is focused on making homebuying accessible for residents and provides an interactive map with the loan limits each county uses to determine if a loan is jumbo or not.
You’ll notice that Arizona has a loan limit of $548,250 across the board meaning that no matter what county your new home is in, you’ll be under the same guidelines when it comes to the amount you can borrow with a conforming loan. If a jumbo loan is your best option, make sure you are equipped to take on the financial responsibility.
Lenders will want to see a strong and lengthy credit history, stable monthly income, low debt-to-income ratios and as many liquid assets as possible including cash and brokerage accounts.
When Jumbo Loan Limits Can Change
For the most part, only high-end properties such as modern luxury builds or those with a gratuitous amounts of land or square footage will need a jumbo mortgage. That being said, it’s possible that the limits on what qualifies a loan as jumbo or conforming can change.
Freddie Mac and Fannie Mae will have their loan amount guidelines adjusted as the cost of housing increases for a specific county at a substantial rate. The reason limits can be slow to change though is that there must be ample evidence that the pricing spike will maintain itself and isn’t just a passing market trend.
Let’s say that Coconino County has a huge influx of migration and the median price rises above their current $548,250 limit. At that point, you’ll either need a jumbo mortgage or a substantial down payment that lets you keep the amount borrowed below limit since the government guidelines may not be adjusted.
If you’re looking to settle down in Arizona and get the perfect luxury home you’ve always dreamed of, let our crew of professional home lending agents on the Potempa Team secure you the best rates and terms available.