A conventional loan is the most common way to buy a home in Arizona, and for buyers with steady credit it often costs less over time than FHA because the mortgage insurance can come off. This guide explains what it takes to qualify in 2026, which loans allow 3% down, how private mortgage insurance works and ends, and how to choose between conventional and FHA on an Arizona home.
Quick answer
A conventional loan is a mortgage that is not backed by FHA, VA or USDA, and most follow Fannie Mae and Freddie Mac rules. You can put 3% down on a one unit home if at least one borrower is a first time buyer, or through HomeReady or Home Possible if your income is at or below 80% of the area median. Two to four unit homes need 5% down, and 20% down avoids private mortgage insurance. The 2026 conventional limit is $832,750 for one unit in every Arizona county. PMI can be removed once your balance reaches 80% of the home’s original value and ends automatically when your balance is scheduled to reach 78%, if you are current.
What is a conventional loan?
A conventional loan is any mortgage that is not insured or guaranteed by a government agency. Most are conforming loans, which means they follow Fannie Mae and Freddie Mac guidelines and stay within the loan limits the Federal Housing Finance Agency sets each year. You can use one for a home you live in, a second home or a rental.
Arizona has no high cost counties, so every county, from Maricopa and Pima to Coconino and Yavapai, uses the same 2026 limits:
| Units | 2026 conventional limit |
|---|---|
| 1 unit | $832,750 |
| 2 units | $1,066,250 |
| 3 units | $1,288,800 |
| 4 units | $1,601,750 |
A larger loan is a jumbo loan, with rules set by each lender. With the Phoenix metro median at $455,000 and the Tucson area at $360,000 in August 2026, most Arizona purchases fit well inside the conventional limit.
What do you need to qualify for a conventional loan in 2026?
These are Fannie Mae’s current rules. Freddie Mac’s are similar, and every lender can add its own requirements on top.
| Requirement | 2026 rule |
|---|---|
| Credit score | No Fannie Mae minimum for loans approved through its Desktop Underwriter system since November 16, 2025. Manually underwritten fixed rate loans need 620. Lenders set their own minimums, and higher scores get better pricing. |
| Debt to income ratio | Up to 50% through Desktop Underwriter. Manually underwritten loans are held to 36%, or up to 45% with strong credit and reserves. |
| Down payment | 3% on a one unit home for first time buyers or through HomeReady and Home Possible, 5% on two to four units, 15% on a one unit rental |
| Gifts | On a one unit home you will live in, the whole down payment can be a gift from a relative or another eligible donor. Builders, real estate agents and other interested parties cannot be donors. |
| Reserves | Set by the automated findings, and higher for second homes, rentals and borrowers with several financed properties |
Your debt to income ratio is your total monthly debt payments, including the new house payment, divided by your gross monthly income. If you are married, remember that Arizona is a community property state: your spouse usually signs the deed of trust even if they are not on the loan, or a disclaimer deed if the home will be your separate property. If you work for yourself, our self employed home loan guide explains how lenders build your income from your tax returns.
Which conventional loans allow 3% down?
| Program | Who qualifies | Key details |
|---|---|---|
| Fannie Mae standard 97% | At least one borrower is a first time buyer. No income limit. | One unit home you will live in, fixed rate |
| Fannie Mae HomeReady | Income at or below 80% of the area median. First time buyer not required. | 3% down on one unit and 5% on two to four units, reduced mortgage insurance coverage, and Fannie Mae waives its loan level price adjustments |
| Freddie Mac Home Possible | Income at or below 80% of the area median | 3% down on a one unit fixed rate loan and 5% on two to four units |
| Freddie Mac HomeOne | At least one borrower is a first time buyer. No income limit. | One unit home you will live in, fixed rate |
A first time buyer generally means someone who has not owned a home in the past three years, and only one borrower needs to qualify. Homebuyer education is required when every borrower who will live in the home is a first time buyer. Fannie Mae also waives its loan level price adjustments for first time buyers earning up to 100% of the area median, and through February 2027 it offers a $2,500 credit on HomeReady purchases when income is at or below 50% of the area median and at least one buyer is a first time buyer.
Arizona’s statewide HOME Plus program can add down payment help to a Fannie Mae HFA Preferred or Freddie Mac HFA Advantage loan, which are the housing agency versions of these 3% options. Our first time home buyer guide covers HOME Plus and the county programs in detail.
How does private mortgage insurance work, and when does it come off?
A conventional loan with less than 20% down needs private mortgage insurance, which protects the lender if you stop paying. Most borrowers pay it monthly, and the price depends on your credit score, your down payment and the coverage the loan requires.
The federal Homeowners Protection Act sets clear exits for PMI on a single family home you live in:
- Ask at 80%. You can request cancellation in writing once your balance is scheduled to reach 80% of the home’s original value, or sooner with extra payments. You need a good payment history and no second mortgage, and the servicer can ask for proof that the home has not lost value.
- Automatic at 78%. PMI ends on its own when your balance is scheduled to reach 78% of the original value, as long as you are current.
- Final stop at the midpoint. If neither has happened, PMI ends the month after the halfway point of your loan term, as long as you are current.
With 3% down on a 30 year loan, scheduled payments alone usually take more than a decade to reach 80%, so extra principal payments are the fastest way out.
FHA works differently. It charges 1.75% of the loan upfront plus an annual premium of 0.55% on a 30 year loan with 3.5% down, and that premium lasts for the life of the loan unless you put at least 10% down. Most FHA borrowers remove it by refinancing.
When does a conventional loan beat FHA?
| Feature | Conventional | FHA |
|---|---|---|
| Minimum down | 3% for first time buyers or with HomeReady and Home Possible, otherwise 5% on a home you live in | 3.5% with a 580 score, 10% with 500 to 579 |
| Mortgage insurance | Priced by credit and down payment. Can be removed at 80% and ends at 78%. | 1.75% upfront plus 0.55% a year with 3.5% down, for the life of the loan unless you put 10% down |
| 2026 limit for one unit | $832,750 in every county | $557,750 in Maricopa and Pinal, $541,287 in Pima |
| Property use | Primary home, second home or rental | Primary home only |
| Non borrowing spouse’s debts | Not counted unless the spouse is on the loan | Counted in Arizona as a community property state |
Conventional often wins when:
- Your credit is strong, because both the rate and the PMI get cheaper as your score rises.
- You can put 5% or more down.
- You plan to keep the loan long enough for PMI to come off.
- You need to borrow more than the FHA limit, for example above $557,750 in Maricopa County.
- Your spouse is not on the loan and carries significant debt, since FHA would count it.
FHA often wins when your credit is still building, your debt to income ratio is high, or a small down payment with a moderate score would make PMI expensive. The only way to know is to price both on the same day. Bianca’s page on conventional home loans covers the options she offers.
Want to see both side by side?
Bianca can price conventional and FHA on the same home and show how long each keeps mortgage insurance.
How can you get the best conventional loan terms?
- Check your credit before you apply. Paying down card balances before your credit is pulled can lift your score and your pricing.
- Ask about income based price breaks. If your income is at or below 80% or 100% of the area median, HomeReady or the first time buyer waiver may lower your cost.
- Compare down payments. Ask for pricing at 3%, 5%, 10% and 20% down on the same day, so you can see what each step buys you.
- Get PMI quotes. Mortgage insurance varies by score and down payment, so ask what yours will cost at each level.
- Document your money early. Keep two months of bank statements and a signed gift letter ready if family is helping.
- Plan your PMI exit. Note the date your balance is scheduled to reach 80% of the original value, and set a reminder to ask for cancellation.
Frequently asked questions
What credit score do I need for a conventional loan in 2026?
Fannie Mae removed its own minimum score for loans run through Desktop Underwriter in November 2025, and manually underwritten fixed rate loans need 620. Lenders still set their own minimums, and higher scores get lower rates and cheaper PMI.
Can I buy a home in Arizona with 3% down on a conventional loan?
Yes, on a one unit home, if at least one borrower is a first time buyer, or if your income is at or below 80% of the area median with HomeReady or Home Possible. Otherwise the minimum on a home you live in is usually 5%.
What is the conventional loan limit in Maricopa County in 2026?
The 2026 limit is $832,750 for one unit, $1,066,250 for two, $1,288,800 for three and $1,601,750 for four. Every Arizona county uses the same limits, and a larger loan is a jumbo loan.
How do I get rid of PMI?
Ask your servicer in writing once your balance is scheduled to reach 80% of the home’s original value, or sooner with extra payments. You need a good payment history and no second mortgage. PMI also ends automatically when your balance is scheduled to reach 78%, if you are current, and at the midpoint of the loan term at the latest.
Can I use down payment assistance with a conventional loan in Arizona?
Yes. HOME Plus works with Fannie Mae HFA Preferred and Freddie Mac HFA Advantage loans, and Home in Five Advantage offers a deferred second on those loans in Maricopa County. Each program has its own income limit and credit score minimum.
Bianca Lopez
Loan Originator with The Mortgage Homemaker, powered by Barrett Financial Group. Helping Arizona buyers and homeowners in Phoenix, Tucson and across the state buy, refinance and invest with confidence.
NMLS #1605655 | Company NMLS #181106
Based in Arizona, licensed in AL, AZ, GA, MA, MO, OR, PA, TN, TX and VA
(520) 907 2520
BiancaJ@barrettfinancial.com
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Sources and official resources
- Fannie Mae Selling Guide: Credit score requirements
- Fannie Mae: Selling Guide announcement on credit scores, November 2025
- Fannie Mae Selling Guide: Debt to income ratios
- Fannie Mae: 97% loan to value options
- Fannie Mae Selling Guide: HomeReady eligibility
- Fannie Mae: HomeReady first time homebuyer credit extension
- Freddie Mac: Home Possible
- Freddie Mac: HomeOne
- Fannie Mae Selling Guide: Personal gifts
- Fannie Mae: Eligibility Matrix
- Fannie Mae: Loan level price adjustment matrix
- CFPB: When can I remove private mortgage insurance?
- HUD: FHA mortgage insurance premiums (Mortgagee Letter, February 2023)
- HUD: Single Family Housing Policy Handbook 4000.1
- HUD: FHA mortgage limits lookup
- FHFA: Conforming loan limit values for 2026
- Arizona Industrial Development Authority: HOME Plus down payment assistance
Information checked October 5, 2026. Rates, loan limits, program rules and assistance funding change, so confirm current terms before you rely on them.
This article is for general education only and is not a loan offer, commitment to lend, or tax or legal advice. Rates, terms, fees and programs vary by lender and are subject to change without notice. All loans are subject to credit approval, underwriting guidelines and property eligibility. Examples are illustrations, not quotes. Down payment assistance is subject to program funding, eligibility and participating lender rules. The Mortgage Homemaker is powered by Barrett Financial Group, L.L.C., NMLS #181106, 2701 East Insight Way, Suite 150, Chandler, AZ 85286, Arizona license #0904774. Bianca Lopez, Loan Originator, NMLS #1605655 (NMLS Consumer Access). The Mortgage Homemaker and Barrett Financial Group are not affiliated with any government agency. Equal Housing Opportunity.
