Interest rate on duplex?

Question

Hi BP, and thank you for existing.

We're very close to contracting on our first investment property, a duplex in which one unit we'd live, and rent out the other.

We've been talking with a lender, a family friend, for a while, and she today quoted a 4.5% interest rate on a 30-year conventional loan for this property. The prevailing rate seems lower - is the higher rate because it's a multi-unit, and/or an investment property? She did say rates for a multi-unit are higher, and rates for conventional higher than FHA, but I wanted to hear some other feedback. Does this sound right?

Any and all input greatly appreciated. Thank you very much!

Twana Rasoul · Answer

@Jade Pickenheim as with most things it depends. Assuming you qualify for the loan and have excellent credit, if you go with fha you will have mortgage insurance of about 0.85% annually (depends on loan amount and LTV). Your rate rate now would probably be around 3.375% ish. For conventional, your looking at 4%-4-1/8% with 15% down and very minor pmi. Putting 20% conventional will give you the same rate as 15% down at best for a duplex but rate gets much better with 20% for sfr.

Best of luck!

Chris Mason · Answer

Claims 1 and 2 are both true statements.

None of us have the full scenario and thus really can't opine from an informed perspective, but those claims are true.

People always want the FHA rate paired with the Conventional mortgage insurance terms, and Conventional's lack of UFMIP tacked onto the loan balance... nope, it's a choice between Basket A and Basket B. No mixing and matching between baskets, these aren't toppings at your favorite FroYo place. :)

Andrew Postell · Answer

@Jade Pickenheim this is a difficult question to answer.  We would need to know your credit profile, employment history, downpayment, loan type, etc.  Is this your first home ever?  Are you using down payment assistance?  There are lots of things that can go into your loan that might affect the rate.  Have you asked your loan officer these questions?

Jade Pickenheim · Answer

@Andrew Postell @Chris Mason @Twana Rasoul Thank you all for your input. If it helps to give a little more info:

1) Excellent credit (750+), no collections ever, have never paid a bill late ever

2) Bad income currently, so we have a cosigner with $100k/yr income and excellent credit (750+)

3) 15% down, no assistance

4) 30-year conventional loan

5) Cosigner owns a primary residence but no real estate owned otherwise

Interest rate on duplex?

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