Arizona Mortgage & Refinancing

Last Updated on September 17, 2020 by Andrew Lee

Residents of Arizona don’t get bored, what with the wide array of activities and magnificent sights the state has to offer them. These, together with the exceptional quality of education and relatively affordable cost of living, also attract home buyers and property investors.

Just to name a few of the best places to live in the state: Flagstaff, Phoenix, and Tempe. It has a good homeownership rating, at 62.8%. With a median home price of $167,500, homebuyers can find properties that cost less than the national average of $186,000. (Source: Livability.com)

Mortgage Lending in the State

Many consumers will find The Grand Canyon State as a first-time home-buyer-friendly state (Source: SmartAsset). Of course, this still depends on the kind of home one wants to buy. In general, though, taking the time to shop around and compare offers can pave the way for the discovery of good deals.

The fact that all counties in the state implement the standard conforming loan limit of $417,000 further indicates the affordability of its real estate.

Why a Fixed-Rate Mortgage Makes Sense

Like in many parts of the country, many borrowers still opt for the 30-year fixed-rate mortgage. There are many reasons behind this, but it’s mostly because of the security such a home loan provides. Because the interest rate of these mortgages won’t change, consumers don’t have to worry about exorbitant increases in their monthly payments. Even if the market plummets, they won’t find themselves in the same financial pinch adjustable-rate mortgage borrowers will have to face.

When to Opt for an Adjustable-Rate Mortgage

The other primary type of mortgage home buyers can apply for is the variable-rate loan, also known as the adjustable-rate mortgage. The primary difference between this and the fixed-rate mortgage lies in their interest rates: the former can move up or down, depending on a number of factors, including stocks, foreign markets, employment rate, and inflation.

The good thing about ARMs is they come with introductory rates usually far lower than those of the fixed-rate loans. Borrowers can enjoy these reduced rates for a certain period of time, usually for a year. There are some lenders even offering the “teaser rate” for three to five years.

A Tip for Existing Borrowers

Those who have already taken out a mortgage can still minimize the amount of money they spend in repaying their debts. One such cost-reducing tactic is the proper use of refinancing offers. Taking advantage of this program can help them secure better interest rates. With a reduced interest rate comes lower monthly payments, which can then help borrowers shorten the length of time needed to get out of this huge financial responsibility.

Refinancing also allows homeowners to swap a fixed-rate mortgage for an adjustable-rate one, or vice versa. Switching to an ARM makes sense if the market performs well, and trends show it will continue doing so. On the other hand, getting out of an ARM to enter a fixed-rate mortgage contract is a good idea if the markets show instability and there is a huge possibility of a rise in interest rates.

Reducing the Overall Cost of a Home Loan

All lending institutions take into careful consideration an applicant’s credit score rating. The better the FICO score, the lower the interest rate. They charge interest rates based on a scoring model wherein a score of 800 (or higher) warrants the best rates, while a score of 579 (or less) can already mean loan rejection. Even those with a score ranging from 580 to 669 can have a difficult time finding a lender that will qualify them for a mortgage.

This said, consumers, can reduce the overall cost of mortgage through improving their FICO score. If possible, homebuyers should wait until their scores go up, so they can have increased chances of qualifying for a home loan with better rates.

References:

Arizona Mortgage Lenders Association: http://azmortgagelenders.com/consumer-tools/

Experian: http://www.experian.com/blogs/ask-experian/infographic-what-are-the-different-scoring-ranges/

Arizona Department of Housing: https://housing.az.gov/finance-authority/home-plus

Save Our Home AZ Program: https://housing.az.gov/save-our-home

The Federal Reserve Board: https://www.federalreserve.gov/pubs/refinancings/