Would you ask a lender to match a different lender's rate?

[Andrey Y.]

So in short, I wanted to make an offer on a property sooner than later. I had asked the lender (by phone call and email) I had worked with recently for a refinance. After waiting approx. 1.5 days without a reply, I asked my broker who was going to be putting in the offer if he had any recommendations. I talked with a nice lady at a small community bank, who told me they had a special where they will be offering the same rate whether I wanted to do a conventional loan or portfolio loan. Sweet, I thought.

After I sent in the required docs, the rate for a 20% down loan was 4.5%, whether conventional or portfolio. So we sent the pre-approval letter to my broker to include with the offer. Later on that evening (like 12:30AM), I get a pre-approval letter from my original lender, 4.0% rate for 20% down. Hmm, that's 0.5% difference, huge in my book. So two questions I was hoping you guys can comment on.

1. When push comes to shove, is it okay to ask the lady at community bank if she can match my original lender's interest rate? They probably can't, but who knows. Also, I did mention to her that I hadn't heard back from my lender so I was calling her to expedite the offer.

2. If faced with the option of a portfolio loan at 4.5% vs. conventional loan at 4.0% percent, which would you choose? Assume that you are well below the limit of 4 or 10 for conventional loans.

[Matt Devincenzo]

@Andrey Y. yes the portfolio counts....it's a one way street. What I mean by that is the order in which you obtain loans matters.

The 4/10 is a conventional limit for underwriting a conventional (Fannie/Freddie) loan. It isn't that you can get 10 conventional loans no matter what, it's that they can only underwrite a new conventional loan if you don't have more than the 10 financed properties. It doesn't matter what type of loan those properties have it is the limit at which you no longer qualify for a conventional loan.

So let's say you start with a portfolio loan and get 10 financed properties. Even though none of them are conventional, you will not be able to obtain any conventional loans at that point and would need to look at additional portfolio loans. 

Let's say you get 5 conventional loans and then get 5 more portfolio loans. You can't get another conventional loan at that point. You are over the financed property limit that FF will lend at and now will have to pursue portfolio loans for any additional properties.

The second part of your post is right on. Portfolio loans are kept in house so as long as that bank/lender deems you are qualified they can lend whatever their internal policy is. So you are correct that is the advantage. If they decide they can give you 30 loans no problem, it's their underwriting guidelines and they can do that.

Here is the announcement that established the 10 loan max. Below is a quote from it on the bottom of page 1...hope it helps.

The limitation on the number of mortgages currently being financed applies to the total number of properties financed, not just the number of mortgages sold to Fannie Mae. Fannie Mae is modifying this policy to allow investor and second home borrowers to own five to ten financed properties if they meet certain eligibility and underwriting and delivery requirements as outlined in this Announcement.