@Brian Bertschi welcome to BP! Sounds like you are talking to the wrong people. Avoid your local banks unless you don't qualify for Conventional financing. Assuming your credit is good, you have the required down payment, you income qualify, etc, for an investment property the rates should be in the low-to-mid 5's for a 30 year fixed for a 1-4 unit residential property. The rate is lower if you will be living in one of the units.
Hope that helps, best of luck!
@Brian Bertschi I see this is your fist post so welcome to BP.
First 6-7% is not bad historically. Next you are right it is hard to make the numbers work. That is true everywhere. Most properties simply do not make good investments and will not cash flow. You have to look at LOTS of deals and the right kind of deals to find a good investment.
Yes you can get longer amortization and maybe better rates. You need to find the right lenders. Local community banks are going to tend to be the best. A mortgage broker that has many option to choose from my help also. Talk to local investors and see who they are using.
It sounds like you told the bank it was an investment property not a home. Don't bring up what you intend to do in the next 2 to 20 years. Stick with what you need when speaking to a loan officer. "Sir, I want to purchase an affordable home and I think a duplex its the right choice for me." Then let them do all the talking. Keep you answers short and to the point. He who talks first frequently loses. Make no mention of future plans. Focus on the need for a HOME today. Your future plans are clouding the loan officers viewpoint.
What part of Southern Illinois? We hold monthly meetings in Alton, Belleville and Marion.
Originally posted by @Brian Bertschi :
@Ned Carey Thanks, I’ve heard local banks will usually be able to give better rates but I was a little discouraged when I talked to a few in my area. I will keep looking though for great deals and rates.
Actually local bank will likely be higher rates. That advantage is they can be more flexible on terms and what it takes to qualify for a loan.
An important concept to understand is the availability of money is more important than the cost of money.
@Brian Bertschi yeah you're solid. I would avoid the banks altogether, big or small. Use a mortgage broker/mortgage lender. You'll get the best terms and (usually) more competent loan officers.
if you have a lot of equity in your home get a HELOC on it. Then you can purchase properties at cash prices with good variable rate. Once you own the property go to local bank to refinance at a locked in rate. Then repeat. I waited until we had 2 Properties then did 1 loan refinance on both so I only have to endure 1 closing. Also, I believe if your putting in business name and not personal, some banks will require commercial terms. So you have to weigh the pros and cons there as well. George is probably right on when talking to bank if your buying in personal name, I have not yet made it to one of his meetings here in southern Illinois, but have seen a lot of him on BP and he seems pretty knowledgeable. I am in Centralia, best of luck to you.
We meet in Belleville and Marion. My contact info is below.
I don't think it hurt that I had my first rental for a while and the second one for a few months before I did a cash out refinance. I also have my rentals in an LLC, so I'm not sure if that matters or not. I did ask my lender if there was a seasoning period and was told no.
@Brian Bertschi , you definitely should be able to do better. Often banks in smaller towns aren't going to be as competitive as we have to be in Chicago. That could be part of it. They also will have less options to choose from. Agree with Zack, you'll definitely want to speak to a mortgage lender/broker rather than a bank. Better rates, easier to work with, and more efficient. Hope that helps!