Happy New Year AZREIA Family! The end of the year for us was as crazy as every which gives us more positive feelings heading into the New Year. Apparently, the market has no intentions of slowing up as applications have already shot through the roof for new home purchases and investment properties. I hope you are all ready for 2020 and more so to crush your goals this year! Now, lets talk about some updates in the lending world!

Subject To

Subject to financing is becoming more and more popular in the investor world. Flips are as cool as they used to be, so it seems subject to is taking over as the next “thing”. If you are doing subject 2 financing, it is important to know how the subject to financing will affect your seller in their buying ability in the future. Because on subject to, the seller is retaining the mortgage in their name…. their debt to income ratio is impacted. Since the new owner is still paying that mortgage, after a while it can be used as “note income” for that seller to purchase a new home later. The mortgage still counts 100% against the original borrower on the note. Once they have receipt of 12 months payments on that mortgage from the new owner (via subject to), they can use that income as qualifying income if we can verify
minimum 3 years continuance. I foresee a few lawsuits soon from investors not properly informing their sellers of this so make sure you know what you are doing.


As we enter the new year and decade, the real estate market continues to excel, especially in Arizona. Many of the trends for 2019 appear to be continuing. Housing inventory, demographic of real estate buyers/ sellers, and mortgage rates are again the hot button topics of the new year.

The Arizona market is still dealing with an extreme inventory shortage, which continues to cause prices to rise. While this is great for current homeowners who are utilizing the increased equity to improve mortgage terms or complete renovations, the rising home prices are making it difficult for first time home buyers to enter the market. The new home communities continue to be developed, but the consensus is that they will not be able to keep up with demand. Unless current homeowners decide to start selling, home prices should continue to rise throughout the year.

Millennials are expected to be the largest percentage of home buyers in 2020. This is in-line with what has transpired over the last couple of years, as the generation is at the ideal home purchasing age. The new expectation is that baby boomers will be the largest home sellers. As the age group begins to retire, downsizing is expected, which will hopefully create more inventory.

When it comes to real estate, mortgage rates are the area that has taken the biggest divergence from last year’s expectations. Heading into 2019, the average interest rate was hovering above 5% with the expectation that the average would go higher. Fortunately, that forecast was incorrect, and rates plummeted back to record lows. At the start of 2020, rates have maintained these low levels. Most experts are predicting anywhere from flat to slightly higher mortgage rates by year end.

Make sure to let us know if you have any questions. We hope to see you at the next AZREIA meeting!

by Andrew Augustyniak, Branch Manager/Loan Officer, Peoples Mortgage Company