Mortgages From Top to Bottom

Conventional loans are not government-backed. They follow guidelines set by Fannie Mae and Freddie Mac. They work well for buyers with solid credit and a meaningful down payment. Private mortgage insurance (PMI) is required if you put down less than 20 percent, but it can be removed once you reach sufficient equity.

FHA loans are backed by the Federal Housing Administration and allow lower down payments and more flexible credit requirements. They carry mortgage insurance for the life of the loan in most cases, which adds to the long-term cost. They are a strong tool for first-time buyers or those rebuilding credit.

VA loans are available to eligible veterans, active-duty service members, and surviving spouses. They require no down payment, no PMI, and generally offer competitive rates. Arizona has a large military and veteran population, so I work with VA buyers regularly. USDA loans serve rural and some suburban areas with no down payment for eligible income levels -- parts of the Phoenix metro fringe qualify.

When a loan amount exceeds the conforming limit set annually by the Federal Housing Finance Agency, it becomes a jumbo loan. Jumbo loans require stronger credit, larger reserves, and often a larger down payment. Lender standards vary more widely on jumbos than on conforming products.

In the Phoenix North Valley, where I work most often, homes in Scottsdale, Paradise Valley, and parts of Cave Creek frequently require jumbo financing. Know your price point before you assume a conventional loan applies.

A fixed-rate mortgage keeps the same interest rate for the life of the loan. Your principal and interest payment never changes. It is straightforward and predictable.

An adjustable-rate mortgage (ARM) starts with a fixed period (commonly 5, 7, or 10 years) and then adjusts periodically based on an index. ARMs can make sense for buyers who are confident they will sell or refinance before the adjustment period begins, but they carry risk if plans change. Understand the caps (how much the rate can move per adjustment and over the life of the loan) before agreeing to one.

The interest rate is one number. The annual percentage rate (APR) includes fees and gives a more complete comparison. Also compare origination fees, discount points (prepaid interest to buy down the rate), appraisal fees, and the estimated closing costs on the Loan Estimate.

Speed and reliability matter as much as rate. A lender who cannot close on time can cost you the deal. Ask how many days they need from clear-to-close to funding. Ask whether they do in-house underwriting or broker your file out. Those answers affect whether your closing date holds.