With credit standards tightening and lending guidelines becoming a moving target, is traditional mortgage financing really the best option for Arizona investment property buyers?  Have you applied for a mortgage lately?  If you have, I am sure you noticed some changes in process from years prior.  More requirements on income, assets, and higher credit scores are needed.  How could I forget the disclosures?  With so much paperwork included in the loan files, you better give yourself a solid hour just to sign everything.  In all seriousness, it is understandable why these changes have taken place.  Over the past 3 years, the government has stepped in and passed several pieces of legislation to regulate the once out-of-control mortgage market.  Going from such a loosely regulated industry to a now, highly regulated industry, it is important to know what it takes to be approved for a mortgage.  There are different guidelines depending on what part of the country you are in.  We are specifically speaking about the guidelines for Arizona investment property buyers and what it takes to get a loan in the current mortgage environment.

Using traditional mortgage financing on Arizona investment property

The Federal National Mortgage Association (better known as Fannie Mae) is a government-sponsored enterprise developed to expand the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities.  A large portion of all Arizona investment property mortgages will be backed by Fannie Mae.  If you were to go into a mortgage broker or banker, there is a very good chance they would be approving you based on guidelines set by Fannie Mae.

Fannie Mae’s Selling Guide is updated regularly with all of the current guidelines for investment properties.  In this guide, Fannie Mae requires 20% down payment on all investment property mortgages in areas deemed a ‘soft market’.  A ‘soft market’ is an area that has experienced a large drop in home values.  Currently, Arizona falls into this category.  Aside from the down payment, a borrower will also need 6 months of the full PITI payment (principal, interest, taxes, and insurance) in reserves and a credit score of at least 660.  Even though these guidelines seem to be a bit strict, the ability to purchase property at relatively cheap prices will make the down payment and reserves more manageable.  Do you have what it takes to be approved for a mortgage?  Because lending guidelines are such a moving target, the best advice is to contact an experienced mortgage professional.

If you do not qualify for a traditional mortgage or even if you do, there are alternatives out there to consider when buying Arizona investment property.  It comes down to what type of leverage will properly fit in with your investment strategy.

Here are some of those alternatives:

• Seller Financing
• Private (or Hard) Money
• Equity Funds

Many of these alternatives require little or no qualifications and can offer similar, if not more, advantages than using traditional mortgage financing.  Learn more about the key advantages to using leverage in purchasing Arizona investment property with Clear Vision Investment Group.