BiggerPockets

I am in the process of rehabbing two 3 family houses in eastern CT and will be looking to refi out of the hard money I used to buy and I am rehabbing them with. Will be looking for a mortgage of about 175K on a value of about 240K. 30 years fixed if possible. Gross income will be about 32,400+, yearly taxes and insurance will be between 6000 and 7200 per year. (depends on what they set the tax value at) That is 175K mtg per building. Can anyone give me a guess on what the rate might be. (credit score is 720+) I expect to have the first one complete by the End of April and the second one by the end of May. I just stated talking to a broker but I have not received and rate info yet. Loans will need to be based on the income from the rent not on my income. I realize I will need to have them rented before I close on a loan

Jon
Thanks, I had an as repaired appraisal done on it a couple of months ago and it came in at $260. I used the 240 due to declining values. If the 240 value held up then I would be under the 70%. Also if I had to leave a little cash in the property (say 10-15K) that is also a possibility. Right now I am just trying to get some budget numbers. Thanks for the response.

If you are looking for a conventional 30yr fixed product then your rate should be between 6-6.75%. What you'll need to be concerned about is how much it will cost you to even get a rate from the lender. Brokers will have a better rates than a banks retail side but the retail side will have lower cost than a broker.

Lenders sell their loans off in the secondar markets to Fannie and Freddie...Fannie/Freddie have risk based pricing adjustments that factor into to determing a rate. For example, Fannie/Freddie charges 1.75% (of the loan amount) for investment properties under 75%, the also charge 1.00% for a 3-4 unit property. Then there are state risk adjustments and credit score risk adjustments. It could easily total up to over 3% paid directly to the lender in discount points just to get the lenders par rate. A par rate means that the lender is not paying out any premium to the broker or retail loan officer. Par rates are typically around 5.375%. Now if you wanted to take a higher rate that would reduce the amount directly to the lender. One of the problems right now with lending is that the interest rates dont have much premium that can be built into them. Let's say that you want to try lowering the lender points as much as possible...you may consider the option of taking the highest rate possible, lets just say 6.75%. Since premiums are low right now that 6.75% may only being paying out 2.0%. Now remember, you had around 3.0% in risk adjustments which means you'd still be owing 1% lender discount. Then you must add on what the broker wants to earn in compensation.

In the past, interest rates had premiums being paid like 2-4%. So the lender/broker could actually charge you a higher rate to cover the risk based adjustments + also earn some of their compensation based upon the higher rate. This allowed to keep the origination cost lower.

With goverment changes you'll see that it's less likely that a broker/retail loan officer will be earning any money off the rate. (they call that the back end). Compensation (origination, not lender discount) will have to be made on the back end at closing.

Pricing out lower loan amounts and 3-4 units is tough right now because of all the high risk adjustments. Explaining all of this to someone who's use to seeing low fees is even more difficult.

Hope this has helped a little. Feel free to ask any questions.

PS..keep in mind that if work with local banks/credit unions for commercial/portfolio loans then all of this would be different. Terms for those you'd likely see rates from high 5s - low 7s on 20yr ams with a 3-5yr balloon.