The real estate industry is one of the most important sectors of the American economy. It is responsible for providing living spaces for people. It allows businesses to operate out of buildings as they serve their customers. It is also an opportunity for investors to grow their portfolios and increase personal revenue.
The state of Arizona has all of these opportunities and more available. It is also a great place to live, work, and play. This state is the perfect place to achieve your dreams of property ownership, whether they are to find a home, invest in rental property, or own a commercial building.
The main obstacle to owning property is the cost. Properties can be very expensive, even if they are very small and in disrepair. Most people cannot afford the cash price of a property upfront, whether it is residential or commercial. Here are some financing options for your property ownership goals in Arizona.
FHA Loans
For those seeking a home for themselves or their families, Federal Housing Administration loans are an option, especially if you have a low income or a poor credit score. These mortgage loans are insured by the federal government, allowing lenders to relax some of their standards so that buyers with limited resources can access homeownership. As long as you stay within the FHA loan limits in Arizona and meet the income/credit score requirements, you can qualify for this type of financing.
Conventional Loans
If you have a better credit score and a decent income, then you will qualify for a conventional mortgage for your home purchase. Typically, you must have a credit score of at least 620 to qualify for this type of loan. The higher your score, the better chance you will have of acquiring a more competitive interest rate. Additionally, you will need to be able to afford a down payment of 3.5% or more. A 20% down payment will allow you to avoid mortgage insurance premiums.
VA Loans
Are you a veteran, active duty service member, or surviving spouse of a veteran? Then, you can experience the substantial benefits of a VA loan. These mortgage products are backed by the Department of Veterans Affairs, meaning lenders can be more lenient with their requirements. The major perks of a VA loan are no down payment, no mortgage insurance, and lower interest rates. You can also use VA loans more than once for home purchases if you still have remaining entitlement.
HELOC
A home equity line of credit, or HELOC, is a tool that many current homeowners use to invest in another property. For example, if you are an Arizona homeowner who has lived in the same house for many years, you can take advantage of the equity you have built to cover a down payment on an investment property. Perhaps you want to rent out an Airbnb, and a HELOC would help you cover much of the cost of a second property. This could be the first step in building your investment portfolio.
DSCR Loan
Rental properties can be a huge moneymaker for smart investors. The rental income that is generated is often enough to cover the mortgage payment and expenses, leaving a little leftover for profits. If you are interested in purchasing a rental property, a Debt-Service Coverage Ratio loan may be ideal. This loan is given out based on the projected income of a rental property rather than the personal income of the borrower. As long as you have significant cash reserves for a down payment and the property has a good record of generating income, a DSCR loan can help you become the new owner.
Commercial Real Estate Loans
If you are interested in buying a commercial property, then you need a different type of loan. Securing commercial loans is often more complicated because there is usually a lot more money involved. Plus, there is the added component of businesses being run in the building, whether they are tenants or your own company. You can obtain commercial real estate loans from hard-money lenders, banks, commercial-only lenders, or even the Small Business Administration. Make sure you do thorough research about what is required for commercial loans in Arizona because they are hard to obtain but necessary if you want to achieve your property ownership goals.
Make Sure Your Budget is Optimized
Since buying property is so expensive, you must have your finances in line. Whether you are purchasing a home, investing in rental property, or buying a building for your company to operate out of, you will need to secure financing that you can afford to pay back. Finding the right loan product and payment structure is crucial if you want to enjoy the benefits of owning property in the state of Arizona, so make sure your budget is thought out and correct.
