Quoted over 8% interest rate for owner-occupied fannie mae 5% down 4plex

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Quoted over 8% interest rate for owner-occupied fannie mae 5% down 4plex

Johnny McKeonPro Member
Rental Property Investor · Mesa, AZ · Member since 2016 · 103 posts · 72 votes

 Hey BiggerPockets family,

I was just approved for an owner occupant, Fannie Mae, 5% down with a purchase price of $1.3 million for a 4plex in the Phoenix Metro of Arizona

My middle FICO credit score is 759

My current DTI debt to income ratio is 30%

I have enough down payment, closing costs for the subject property, and enough liquid reserves for all 10 of my apartment buildings totaling 45 units in PHX Metro AZ

my mortgage lender quoted me with a rate at 8.125% with me paying 0.156 points totaling $1,920

My question is,

does this 8.125% interest rate sound reasonable for an owner-occupied fourplex 5% down Fannie Mae conventional loan as of March 27th, 2024, at 1700 hours?

What has everyone else been quoted or

What is everyone else seeing/hearing with interest rates for

owner occupied fannie mae 5% down for a 2 to 4 unit property or with other low down payment owner occupant loans such as FHA or VA ?

I thought owner occupied loans are supposed be lower interest rates then non-owner occupied loans or DSCR loans

also I asked the lender if she could adjust the purchase price to $750,000 to see if that would lower the interest rate and the interest rate actually went up to 8.625% and pay 0.353 points

I'm thinking I should find a mortgage broker that can quote me with multiple lenders to shop the rate and loan costs instead of a direct lender 

Thank you for the help!

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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
2y

I'm not a lender, but that seems about right...here's the LLPA chart: 

https://singlefamily.fanniemae.com/media/9391/display

Todays vanilla 20% DP, OO SFR rate is what 6-6.25% maybe. So add 0.25-0.5% for a high LTV, another 0.625% for 2-4 unit and 1.0% for high balance (I assume this falls into the high balance category) and you're right around the rate you were quoted.

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  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    2y

    I'm not a lender, but that seems about right...here's the LLPA chart: 

    https://singlefamily.fanniemae.com/media/9391/display

    Todays vanilla 20% DP, OO SFR rate is what 6-6.25% maybe. So add 0.25-0.5% for a high LTV, another 0.625% for 2-4 unit and 1.0% for high balance (I assume this falls into the high balance category) and you're right around the rate you were quoted.

    2Reply
  • Johnny McKeonPro Member
    OP
    Rental Property Investor · Mesa, AZ · Member since 2016 · 103 posts · 72 votes
    2y

    Wow! Thank you so much Matt for breaking that down. 

    makes sense when you look at LLPA (loan level price adjustments) and you factor everything in.

    All those basis points really add up.

    I just didn't understand when I asked the lender if she could price the interest rate at a lower purchase price and she did and the rate actually went up even more . 

    I was getting quoted with the DSCR in the 8% and 9% for strictly an investment on an non owner occupied 4plex on a different property

    so I thought it would be cheaper for my primary residence

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  • Zack KarpPro Member
    Lender · Schaumburg, IL · Member since 2015 · 833 posts · 774 votes
    2y

    @Johnny McKeon I posted on your other thread, but to answer the above, no this is not a high balance situation. The loan amount is within the standard loan limit for a 4-unit. That rate is crazy high and you should be in the mid-6's for this scenario with no points.

    Best of luck!

    847-387-5513
    1Reply
  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    2y

    There are different ways a loan can be structured. If you talked to a direct/retail lender, their compensation is typically "baked" into the interest rate and is paid by the lender. Brokers can either do the same and make their comp from the lender they broker to, or the borrower can pay it out of pocket at closing (this results in higher closing costs) and get a lower rate in return. Pricing this scenario out, I'm still in the mid-7s with lender paid compensation (and no points), or you can opt for borrower-paid compensation and get a rate in the low 6s. It all depends on the borrower and what works best for them. If the borrower is very liquid and they are rate-conscious, typically borrower paid comp is a better option. For the borrowers with limited funds, lender paid comp works better. 

    For comparison, a DSCR loan with 25% down, 3-year prepayment penalty and a 0.25% credit also prices out in the mid 7s (but requires a much larger down payment compared to owner-occupied). It all depends on the scenario and the lender.

    You mentioned owning 10 apartment buildings - do these all have conventional financing? If so, that could be an issue...Fannie/Freddie have a limit of 10 conventionally financed properties. 

    [email protected]330-354-6590
    Brittany Minocchi - Barrett Financial Group, LLC522 Reviews
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  • Austin ClarenceBusiness Member
    Lender · Phoenix, AZ · Member since 2023 · 136 posts · 32 votes
    2y

    Hi Johnny, this seems fairly high. Pricing has worsened in the past 5 days since you originally posted this but with the pricing I am seeing you would be saving $850+ a month on this. Would love to connect if you wanted a formal quote 

    [email protected]650-906-2376
    Austin Clarence with NEXA Mortgage552 Reviews
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