What kind of terms to expect for conventional loans?

8 Replies

I am currently checking around local banks to find out the way they finance rentals, and I am only being offered ARM or loans with a balloon payment, and getting them to finance for 20 years is even difficult, most of them are only offering 15 years. My question is: is this typical when financing conventional? I am also getting rates of between 5.19-5.39%

You can pick any product you want 30, 25, 20 and 15 year fix under conventional loan. Sometime your scenario do not support particular product ask your lender why your loan scenario is not getting 30 year fix they will explain you. 

@Breean Reyes I could be wrong but it sounds like to me you are being offered portfolio products or commercial products. Not Conventional/Conforming products. 

@Jeff Dulla I'm being told that the only type of loan available to me is commercial ( which I see is confusing since I used the word conventional, I just assumed that meant through a bank, especially since I'm being told "conventional" is only for my private residence and not allowed on investment property) Is this not typical? So far I've tried 2 local banks and a credit union with the same results.

@Breean Reyes Generally speaking, here is the definition:

A conventional mortgage is a home loan that isn’t guaranteed or insured by the federal government and conforms to the loan limits set forth by Freddie Mac and Fannie Mae. You can get a conventional loan at a fixed or adjustable rate.

What type of property is this? Are you trying to hold title in LLC?

@Jeff Dulla it is owned by our LLC, we originally purchased through private lending but had to refi out by 3 years and we were blindsided a bit by our mortgage terms and it unfortunately ate up all of our cash flow. We are now looking for another property and trying to refi our existing one, but I'm a bit discouraged by the lending terms I'm being offered, especially since the area I'm in has low rents/income but high property prices, so the margins can be tough.
Tge property has a 4 bed/ 2 bath home and a commercial building with 2 office units in it.

@Breean Reyes You cannot borrow in an LLC with conventional loans. You could get a conventional loan with 30 year fixed rate on an investment property with 1-4 units, but it would have to be in your name, not an LLC.

If the building is mixed use as you described you won't be able to finance with a conventional loan.  There are limited exceptions with mixed use owner occupied properties that are still primarily residential in nature, but a non owner occupied commercial building with 2 offices isn't something that would be permitted with a conventional loan.

@Stephanie Irto thank you for the clarification! I may have to sit down with a lawyer to find out the pros and cons of different structures as I move forward, the commercial financing is not at all ideal.

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