Rates on conventional loans?

12 Replies

Hello I am trying to get a sense of what a reasonable rate for a conventional 80%LTV loan would be (ballpark). I'm looking to buy out of state rental property. 20% down from my HELOC. I have excellent credit and I was able to obtain a 3.75%APR on my personal residence. I understand that for investment properties is higher but how much higher? I was quoted 5.1% but it seems too high. If anyone has any info it will be greatly appreciated. Thanks.

It depends on the lender, of course. The last conventional loan I got (closed 1.5 months ago) was at 4.125% for a 4 unit at 70% LTV. 5.1% seems high.

I would keep looking at other lenders if 5.1% is what you're quoted.

For someone with incredibly low DTI and incredibly high credit scores you are looking at about 3/4 a point higher than the Freddie Mac weekly surveyed rate. The higher your DTI and lower your scores, the further above the average it will go. The Freddie Mac Weekly survey also publishes regional variances in the rates.

Cecilia Arnulphi are you sure you are looking at the rate and not the APR? Either way, that seems a little high, but it also depends on what your loan size is. If you are financing a small loan then you will most likely pay a higher rate - even on a conventional loan.

@Cecilia Arnulphi

15%-20% down is acceptable to Fannie Mae, but the loan level pricing adjustment is absolutely horrible. 15% down being the most extreme, where your adjustment for investment property is nearly twice as much as someone doing 25% down would get hit with. 20% down is penalized about 50% more compared to 25% down.

Take a look, source is here from fanniemae.com.

Note that these are adjustments to price for rate, not to rate. That 3.375% means you could in theory pay 3.375% in discount points to make this adjustment go away. Otherwise, it's getting baked into your rate.

Several months ago, I actually did have a buy-and-hold investor that put 25% down and paid the 2.125% to get a sexy owner occupant interest rate. So it does happen. It's just rare and most people would rather take the higher interest rate.

@Chris Mason  thank you for the feedback.  Yes I'm looking at a small loan and that's also driving the interest up.. I will have to analyse the numbers and figure out if it makes sense to go for it or move on.

For what it's worth, I was quoted at 4.5% by 2 different people last week with 20% down for a SFH.

@Cecilia Arnulphi - Happy to send you info for the lenders I've been in touch with who work primarily with investors, if you'd like.  Send me a PM if that would be helpful.  

@Cecilia Arnulphi . If you are unable to qualify for a conventional loan, you should explore potential rental investor loans with specialty lenders. There are lenders out there that will look at the actual income from the property to qualify you for a loan and not your personal income. Down payments on average are ~30% of the property value. Good Luck.

@George Despotopoulos this is good to know, thank you! Are their rates much higher than a conventional loan? Also do I need to go with a lender licensed  in the state where I'm investing in?  

Originally posted by @Russell Brazil :

For someone with incredibly low DTI and incredibly high credit scores you are looking at about 3/4 a point higher than the Freddie Mac weekly surveyed rate. The higher your DTI and lower your scores, the further above the average it will go. The Freddie Mac Weekly survey also publishes regional variances in the rates.

 This is right on.   You really cannot ask someone else what rate they are getting, and whether or not you should shop around or not based on their numbers.  Your financial portfolio determines your rate.  Example:  I recently got a 3.75 30 year fixed on investment property, while a friend of mine, through same bank, got 4.875.

   

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