Locating And Profiting From Investment Homes In Surprise

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April 21, 2014
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Surprise  Arizona, a western suburb of Phoenix, was the boom community of the mid 2000′s. The running joke was that in the morning you could drive to work in the far western part of the valley, and on your way back to Phoenix in the late afternoon you would find that they had built a whole new subdivision with a shopping center that day.  Hilarious right?

The buildup seemed to happen that fast. Thousands of homes were build in a matter of a few years, and most of them were of good quality. Now we are seeing a resurgence of interest, as people are beginning to come back to the Phoenix areas to live.

There are growth areas of jobs in the medical and educational fields. As these areas gain more of a foothold, then supportive businesses and projects take hold, and these things are the makings of a good economy.

Timing is Everything
Now is a good time to be thinking about investing in the Surprise area as far as rental properties, because people will want to live in that area for the same reasons they lived there in 2004. Surprise is close in to the city of Phoenix proper, but far enough away to not be too close to the hubbub of a large metropolitan area.

Surprise is also close to the sports complex that houses the Arizona Cardinals professional football team, as well as the hockey area. Spring training for baseball is always a big event in the western suburbs, and Surprise is close to that as well.

The real estate values are there, and investment properties can be purchased for prices that will be considered a steal in just a few short years. People come to the Phoenix area for the same reasons that they always have. The climate and relatively laid back way of life. Yes it does get hot in the summertime, but that is why they invented the swimming pool and air conditioning.

Finding the right help

Find a good realtor who is knowledgeable with the Surprise rental investment market. Perhaps, if you don’t already have one, he or she can put you in touch with a good banker. Spend some time with these two individuals because you supposedly have money to invest, they can help you make the best investment because they will be privy to information about the area.

There are two good, growing markets of people who have good jobs in central Phoenix and Surprise, and those are the medical and educational markets. There is Arrowhead Medical Center, as well as two or three other hospitals in the area, as well as Grand Canyon University nearby.

Find ways to get in touch with people associated with growing and steady industries like these and you will have an inside track on finding people to rent your properties.

Look for properties that you can buy at a discount, yet you can see that due to location, any special features of the home, or the price is just lower that its peer homes. These types of situations will always give you a little edge in cash flow, and many times in business, a little edge is all we need to stay profitable.

Check out the school and shopping situations in the immediate areas, for those two items will determine what kind of people you will be renting to. You are looking for people who will be reliable in paying their rent, so you are probably looking for professional, reliable renters who you can count on. If the schools are run down and the neighborhoods around the school are trashy, then move on to better pastures.

Look for properties in well kept neighborhoods, where people keep their yards up. Yes, you might be able to pick up a foreclosure or a distressed housing situation, but too much of that can get you back into a bad neighborhood.

Look for homes in Surprise with good access to main streets into Phoenix as well as on out to the far west valley. You will find that many seasoned Surprise residents will avoid the 101 freeway during rush hour, and just use the streets. In other words, look for homes you can purchase to rent that you would live in yourself for all of the obvious reasons.

A growing segment
Naturally, the over 55 population is booming and we all know Arizona is a hotspot for seniors.  Surprise has a huge senior population with multiple masterplanned communities only for the over 55 crowd.  Sun City West and Sun City Grand are two of the biggest.  Where Sun City West was built in the 70′s and 80s, available homes in Sun City Grand were built in the 90s and after with stucco and tile roofs.

Either play is a good one as seniors will continue to buy homes in Surprise.

Today’s FICO Score Driven Mortgages

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February 4, 2014
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Mortgage Credit ScoresIf you are under the age of 40, you likely think that getting a mortgage has never been more difficult as the lenders and government have tightened their respective belts after the financial crash starting in 2006.  Well, you aren’t far from the truth, but the real truth is mortgage lending is cyclical in respect to tight or loose underwriting requirements.

In the current environment, we see several areas in which lending is more difficult today than it was 12 years ago.  We won’t count the run up from 2002 through 2006, as that was period absolutely riddled with “beyond comprehension stupidity” in terms of what lenders were accepting from their prospective customers’ financials.

Today, FICO scores are more important through the industry, particularly for government backed loans, than ever before.  Since the 90’s, conventional loans have been driven by FICO scoring.  If you are not aware of what exactly FICO scores are, they are a mathematical algorithm pioneered by Fair Isaac and Company, designed to quickly assess the risk associated with any person who has a credit history.

Of course, based on the risk level of any individual, a company can simply look at the scores and decided “yes” or “no”, and then offer an interest rate associated with that FICO score based on that risk.

Prior to 2007, FHA insured mortgages, did not require FICO scores from its borrowers.  Hence, a borrower could show up with a history of on time utility bills, gym membership payments, or a history of paying a doctor on time, and get a home mortgage.

Well, that doesn’t fly today.  Lenders today all have a FICO requirement for FHA loans.  For most, the very lowest scores can be is 620, although some lenders can go as low as 580.  As a side note on the 580 lenders, the person has to be pretty much perfect once they get below 620 or they simply won’t get a loan.  So, for all intents and purposes, 620 is the lowest practical score for borrowers today.

Conventional loans continue to use FICO scoring, but today, the scores are used not only for qualifying purposes, but to determine which interest rate the borrower will get.  Naturally, the higher one’s score the associated interest rate will be that much lower.

The other area of conventional mortgages affected by the FICO scores is the total loan amount.  Remember, scores are all about risk assessment and the higher the loan amount the greater the associated mortgage payment.  It follows that higher payments, given all things being equal, will equate to more defaults.

Hence, better FICO scores for conventional mortgages equate to higher loan amounts.  As risk goes down for a particular borrower, a lender can feel comfortable loaning more.

Down Payments

FHA loans have always been very low down payment options, which is why for many years it was considered an entry level or first time home buyer’s loan.  In fact, when FHA was established in the 1930’s, one of the reasons was to create an entryway for homeownership.

Thus, down payment requirements, albeit higher today than 13 years ago are still quite manageable at 3.5% of the purchase price.

Where FHA has become more viable is in maximum loan amounts.  13 years ago FHA loans were generally pretty small relative to the average sale prices for any given area.  Although they still do not lend as much as their conventional counterpart, the loan amounts have come up will about the area average home price.  With that in mind, it is now being used more often as a move up loan product.

Conventional loans are quite the same in regards to down payment.  There is no more 3% down loans however.  The minimum one must have is 5% of the purchase price.

How does credit factor in to all of it?

Getting a home mortgage is sort of a cocktail of various parts of one’s financial profile.  The one string that runs through all of it is credit and one’s credit history.  Whether you get approved, your interest rate and how much you must use as a down payment are all results of a credit history, particularly for conventional loans.

Conventional underwriting will be much tougher, for example, on a person offering 5% of the purchase price as down payment as opposed to 20% down.  Risk goes up with less down, right?

This is why, particularly after the beating so many people took after 2007, that FHA has become the loan of choice with its moderate credit requirements and low down entry.

Even still, many people don’t have the credit even for FHA loans which is why credit repair has become a cottage industry since 2007. 

You can imagine how many bankruptcies, foreclosures and other big derogatory marks were left on credit reports.  Well, for many black marks, like foreclosure and bankruptcy, lenders let you rent for years on end until those marks “season” long enough that they’re formula says “you’re a good risk” again. 

People know this and although home ownership is not as important to the whole of society as it was formerly, the vast majority of people still consider it a staple and signal of upward financial mobility and stability.

Hence, many with rough credit histories are jumping on the credit repair bandwagon for the express purpose of purchasing a home.  It should be noted that credit repair is tricky business.  Many companies involved are doing so for a quick buck and don’t have much experience nor the inclination to help you in the proper way.

It’s a money making proposition for many and many will tell you whatever you want to hear in order for you to drop $600 to $1,500 to repair your credit.  If you’re looking to boost your credit scores in Phoenix by using a credit repair service in Phoenix for the purpose of buying a home, be very careful of whom you choose.  Check the fruit on the tree.

On the flip side, top Dallas credit repair companies exist which have been in business for many years and will continue to stay in business because they actually do the work of credit repair and offer very good advice for their clients to rebuild an excellent credit profile.