Higher rate out of state?

Question

I've been told you need to put more money down (25%) and can expect a worse interest rate on a loan for investing out of state. If I got approved for 3.8 for in-state rental property, approx what can I expect searching for out of state?

Can you still do a 30-year fixed? Would insurance on the house also be more if I was out of state? Any other price increases for me to be aware of? Thanks.

Rahul Bhatt · Answer

property tax might change a lot

Chris Mason · Answer

Hi @Francis Rusnak,

Individual lenders can have regional interest rate pricing, and it not be unlawful discrimination, provided that the area is large enough not to encapsulate primarily one ethnic group. Typically your HCOL areas will have better interest rate pricing because the loan amounts being so large more than takes care of fixed expenses such as a regional compliance department etc. In a cheap area, you've got to jack rates up quite a bit to pay for the fixed expenses. Wholesale and brokered sources that are not region-specific kind of meet in the middle, but then the individual broker once again must pay for those fixed expenses based on the lower loan amount, so they have to mark it up more.

I've had people get mad at me because when they walked into the local branch of the same company I work for, they weren't offered what I told them on the phone, ergo I "lied."

Before some regulatory changes a while back, a co-worker of mine here in the Bay Area did a crap ton of business in the Midwest because at the time she could offer Bay Area interest rate pricing across the nation, based on her branch being physically in the Bay Area. That trick no longer works across state lines, only within a given state.

Ned Carey · Answer

These are things that are going to vary by lender. You need to talk with many lenders to find out exactly what their criteria are.