Mortgage issues - First time Buyer

4 Replies

Hey Everyone, I'm new to this site. I have an interesting situation and i would appreciate some professional insight. I recently just made an offer on my first house on a duplex in Holley, Ny and it got accepted. The purchase price of the home is $92,500. I'm now in the process of obtaining  a mortgage. The problem I'm having is that i am in a first time home buyer program that i signed up for through M&T bank. It's a federal loan program through Federal Loan Home Bank of NY. M&T bank is telling me that an owner occupied duplex they will give me an interest rate of 5.625 with purchasing 0 points and 20% down. The reasoning they gave me was because multi family propertys are more risky and that they increase interest rates for homes under 100k because they don't make as much money. I then called the local credit union and they said rates fluctuated between 5-5.1% today for multi family units if I were to go through them. The problem is that i'm locked into M&T with my first time home buyer program. I get a free 8k towards my mortgage for being in the program. I called Federal Loan Home Bank of NY and they said the only way i could switch lenders is if M&T could not fit me for a suitable loan, meaning i had to not be able to qualify and they would have to be willing to sign off on me. The credit union also stated that they have not received any transfers from the program and they believe it's difficult to do so. My justification to M&T was that my contract with the seller is contingent on me finding a loan at 5% (which the realtor told me it was playing it safe)  and they can’t offer me a suitable loan with a comparable interest rate. So has anyone heard anything about anyone backing out from one lender to go to another with the first time home buyer program? Do multi family and cheaper houses always have higher intrest rate? Any advice is appreciated.             

Side note: no outstanding debt, make 75k a year, 762 credit score. - I feel like they are really screwing me over with what they are offering me. My friends who have way worse jobs and credit scores are getting loans almost a full 1% better then me. Makes no sense. So much for killing myself to get a good credit score.

Hello Nathan!  Unless you have a contingency clause in the purchase contract that states you can go somewhere else that is offering less of an interest rate is and unless you have a contingency that says that it's probably not going to help you from what you said versus reality.  A multimillionaire I have been watching on YouTube is getting a bank loan of 4.5% on apartments but he now owns over 4,000 units which is probably why he gets the low rate.

The bummer part of that if you are getting a "home hacker" loan is that not everyone can offer that as a loan.  In other words, you might be out of luck.  I assume that is what you mean when you say you are a   "first time buyer program".  The interest rate difference does not mean much as far as debt payment goes.  If your figures counted on that lower rate you figured it too tight and it should have not made a big difference.

The person I listen to on YouTube says to always figure a worst case scenario when doing the subject property's evaluation research when working on any deal so you are covered no matter what happens.  Bank workers usually say anything to get another sale (or loan).  You need to assume that many of the lender representatives lie or stretch the truth to make a sell.  Anytime money is involved their are probably crooks out there so be careful.

I wish you would have started out on 3 or 4 units that may give more of your debt service covered by the tenants.  You did not mention any of the geographic information on your current living place or the location of the subject property, both of which has some meaning in my answers.  You also did not say anything about who previously owned the subject property which might have created another answer.

If the subject property was previously owned buy the bank that is doing your loan would make a difference in my answer.  hopefully, this is considered a long term investment.  You also did not mention any repair/rehab budget.  I hopefully wished that you have learned a few lessons on this one and will use them on your next purchase.  Most loans are more negotiable than on a regular bank and considers more on the deal and not you.

Typically, do not believe everything a Realtor says.  All of the interest rates you mentioned ought to be good from my point of view.  If any of them make that big of a deal you probably offered too much.  The subject deal should work fine with those rates, either one or either group of rates mentioned.  Whenever you go for a loan it should be shopped before you buy to get the best possible loan for you.

Who he heck am I?  Well, I'm a 61 year old that has been around a thing or two.  I have about 30 years of construction management experience plus I had a real estate Broker license in Texas for about 30 years.  I was born and raised in Dallas, Texas , so I've been around the block a time or two.  Good luck to you!

Hi @Nathan Godson ,

I"m going through escrow right now for our first duplex in Indianapolis and following David Greene's Long Distance BRRR (but may not be able to refi with the interest rates climbing this year.) In any case, we are committed! :) 

It's great you are living in our new duplex and qualify for a FHA since you're a first time home buyer. And concur with the statement because our lenders told us the same that rentals are 'riskier' and our duplex is an investment, hence interest is higher than originally quoted 2) we are first time investors (but we have excellent credit and w/o contingencies) Still from the first 4.8% quote to now 5.3% no points, we decided that we would go with it (McGlone Mortgage, with a strongBankrate - McGlone score)

I learned that for us, finding conventional loans first before reaching out to commercial loans, 5+units would work.  We will gain experience and show our lenders and hopefully qualify for larger loans (ie: Finance of America - I researched them, they were great, good tier programs for residental (6.1%) & commercial, but the commercial loans were for much larger amount, but we didn't need it, plus the rate was very high) 

I hope this helps. Let us know what you've decided to go with and keep us informed about your duplex journey! I'm going through this too! 

Cheers~ :-) 

Lynne may be missing the forest for the trees here. "I get a free 8K towards my mortgage for being in the program"  and 0 points? take this deal immediately. Check the math of the extra half percent on less than 100K vs. 8K....not sure what the refi options are but this seems pretty good to me. 

Check out historic norms of interest rates and don't obsess over half percents.

@Nathan Godson