Mortgage Interest rate question

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Mortgage Interest rate question

Chad R.
Real Estate Investor · Indian Rocks Beach, FL · Member since 2017 · 14 posts · 3 votes

Quick question, we are in the process of purchasing a property in FL for the sole purpose of STR, I have a question on the rate we are getting from our broker, hes quoting us 5.3% with 20% down (loan 228, 0000) this is in my wife's name (credit score 800+), I was hoping to get something in the 3's but hes saying as this is not primary residence we cat get anywhere near that.. Thoughts / Feedback?

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Melvin ListBusiness Member
Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
8y

@Chad R. I would shop around.  Sounds like there is a lot of margin built into that rate so I am not sure you are actually dealing with a Broker.  Also another 5% down get rid on some of the Loan Level pricing adjustments.

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  • Peter K.
    Real Estate Broker · Raleigh, NC · Member since 2017 · 174 posts · 69 votes
    8y

    @Chad R.

    I don't know how it is down there in Florida but the national interest rate for a "investment property" (Not primary residence) on a 30-yr fixed conventional loan is around 4%-4.5% right now.

    Home loan brokers usually find the best rates out there in your area, but 5.3% does seem a little high but it could be just about right in your area, who knows. I would shop around local banks to see if they offer better rates just to compare (do your own due diligence). Tell you right now, with a conventional 30 yr fixed loan for a investment property you will not get anywhere near a 3% range. Best to hope for a 4% and up.

    Best of luck.

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  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    8y

    @Chad R. I would shop around.  Sounds like there is a lot of margin built into that rate so I am not sure you are actually dealing with a Broker.  Also another 5% down get rid on some of the Loan Level pricing adjustments.

    C2 Financial
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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y

    I doubt her credit score for the mortgage enhances version of the FICO algorithm is 800 plus.  The mortgage one is typically about 40 points below the credit card enhanced FICO algorithm.

    Also FICO isnt the only factor here. DTI is going to play a role in the interest rate offered.

    With a low DTI, and high FICO, Id expect in the 4.75-5% range for a rental property. But again, many many things go into determining the rate.

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  • Christian Wathne
    Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes
    8y
    Rate seems high. We just refi’d our brrrr (investment prop in Washington) and received quotes from 2 companies, without any buydown points they were about 4.4 and 4.5% with similar credit and 34% dti
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  • Paul C.
    Rental Property Investor · Henderson, NV · Member since 2013 · 96 posts · 33 votes
    8y

    Any of the big national banks should easily beat 5.3%. Are you dead set on a 30-year? With a 7/1 ARM, you could probably get something in the high 3% range.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y

    Something that just jumped out to me.....mortgage rates are issued in 1/8th amounts. So there is no 5.3%. It is either 5.25% or 5.375%. So double check to make sure you know what you are looking at and understand it.

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  • Chad R.
    OP
    Real Estate Investor · Indian Rocks Beach, FL · Member since 2017 · 14 posts · 3 votes
    8y

    I had a second quote this morning from quicken loans, came in a lot better at 4.125%, have given the broker the option to match this...

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  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y
    Originally posted by @Chad R.:

    I had a second quote this morning from quicken loans, came in a lot better at 4.125%, have given the broker the option to match this...

     Quicken is likely quoting you an owner occupant rate.  They are about the worst lender out there, and and this is a typical mistake they are going to make and it wont reveal itself til you are a couple weeks into the loan process.

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  • Chad R.
    OP
    Real Estate Investor · Indian Rocks Beach, FL · Member since 2017 · 14 posts · 3 votes
    8y
    Originally posted by @Russell Brazil:
    Originally posted by @Chad R.:

    I had a second quote this morning from quicken loans, came in a lot better at 4.125%, have given the broker the option to match this...

     Quicken is likely quoting you an owner occupant rate.  They are about the worst lender out there, and and this is a typical mistake they are going to make and it wont reveal itself til you are a couple weeks into the loan process.

    He advised he could get a lower rate if it was classed as a second home (vacation) - which we will occasionally..

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  • Richard Elvin
    Investor · Cleveland, TN · Member since 2016 · 279 posts · 187 votes
    8y

    I have a refi with Quicken. I have nothing but good to say about them. Not that you asked. :) I'm not affiliated with them in any other way. 
    I'm also a fan of local credit unions.

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  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y

    I just got my rate finalized on a cash out refi, Interest Rate: 4.625% 30yr 75% LTV under 200k. Regional bank (midwest), lend all 50 states though.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y
    Originally posted by @Chad R.:
    Originally posted by @Russell Brazil:
    Originally posted by @Chad R.:

    I had a second quote this morning from quicken loans, came in a lot better at 4.125%, have given the broker the option to match this...

     Quicken is likely quoting you an owner occupant rate.  They are about the worst lender out there, and and this is a typical mistake they are going to make and it wont reveal itself til you are a couple weeks into the loan process.

    He advised he could get a lower rate if it was classed as a second home (vacation) - which we will occasionally..

     You will want to check with him if the terms of the mortgage product allow for majority use as a short term rental. They likely do not as a mortgage product that did, would have a higher rate pricing adjustment than what he is quoting you, so he is likely inadvertently going to cause you to commit mortgage fraud...or is as typical with Quicken, a couple weeks into the process they will say oops, we need to put you into a different loan product.

    Definitely get a different lender quote from the first guy, as it does seem to be on the high side, but dont go with one of the worst known lenders in the country.  In fact when Im selling a house, and the preapproval letter is from Quicken, I just move onto the next offer as I know that with Quicken there are going to be problems.

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  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y
    Originally posted by @Richard Elvin:

    I have a refi with Quicken. I have nothing but good to say about them. Not that you asked. :) I'm not affiliated with them in any other way. 
    I'm also a fan of local credit unions.

     at least on a refi you don't have to worry about losing the deal because your funding falls through at the last min and your out inspection costs etc...

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  • Richard Elvin
    Investor · Cleveland, TN · Member since 2016 · 279 posts · 187 votes
    8y

    @Matt K. That's true. There are also potential issues with renting a home that's labeled a "vacation" home. I know several local credit unions won't allow that. I don't know how strictly it's enforced.

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  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    8y

    @Chad R. If you are planing to rent the property out I would stick with the Non Owner Occupied rate.  You should be able to get in the low 4's based on your scenario.  

    C2 Financial
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