I am going in on a four plex in Texas, and I am having a partner in with me to make the up front cost more manageable for me. However my lender says that he has to be on the loan with me. Now I am getting charge .8% more interest for it being an investment property rather than owner occupant.
I remember when I bought my first home with an FHA loan the lender looked through my bank account and grilled me on any type of income coming in. There thing was they didn't want investors to be in on my new home and trying to make money off of my situation. However, this is different then the deal I am trying to close now. Since I am upfront and saying investment property I feel my lender is confused.
My question is, if I take a conventional loan out for an investment property. Why does it matter where my funds for down payment, closing cost, and rehab come from?
1. Lender wants to ensure you have not borrowed the funds for down payment.
2. Investment loans have more risk than owner / occupant loans.
3. Lender wants to ensure people putting money in the deal are personally liable for the loan. More chances of lender recouping their principal.
4. Why would "Partner" in the deal not want to be on the paperwork to ensure they have rights if you default?
We learn all the lessons and some of the rules along the way: Some easy - some hard!
You may be the Buyer - but the Lender has the moneeeeeey!
The Golden Rule Of Real Estate is He who has the Gold - Makes The Rules!
So find out what the Lender wants and give it to 'em - It's less painful that way!
The more skin in the game you have, the less likely you are to walk away from the loan if it goes south. That's why it matters where your funds come from.
What you were embarking on borders on mortgage fraud. In your first paragraph, you say "Now I am getting charge .8% more interest for it being an investment property rather than owner occupant." Did you tell them up front that you were going to live in the property or did you tell them it would be an investment property?
Conventional financing has very specific rules to follow and falsifying information on the application to get a better interest rate or to qualify and then subsequently closing on the property is a really big deal.
There are loans out there that do not require seasoning of funds, would allow your friend the investor to not be on the loan (or be on the loan if he/she wants depending on credit), but it's not a conventional loan and the interest rates are not conventional interest rates.
You need a good mortgage broker and you need to tell them everything so they can put you in the right mortgage vehicle for your situation. Otherwise, you could end up with a boatload of trouble.
My two cents
Originally posted by @Joseph Garner :
I have been up front with my lender, she knows what we are trying to accomplish.
Since then we have been able to work things out properly.
She even says she can help me with a re-fi when that times comes, and has even gone over those fees.
Thank you for your feedback.