Any suggestions on lenders in the Raleigh/Durham area?

[Raj Shah]

Hi everyone! I just want to join in on this forum. I am new to investing in the Raleigh/Durham area. My daughter just started in college there and I would like to buy a few rental properties. Any good suggestions for lenders? I just got pre-approved through a lender suggested by my agent and got a very high interest rate of 4.875%. Does that seem reasonable for an investment property ? I got a much lower rate to buy a primary residence recently at 2.9%.

Any thoughts or suggestions are welcome!

[Bob Mills]

Hey Raj,

The answer on a rate depends on several contributing factors such as how much you're putting down, the amortization, whether you are paying for any "points" up front to reduce the rate, the type of property (SFH vs. multifamily), and whether you're talking about an agency loan (FHA -Fannie/Freddie/HUD) vs. a balance sheet loan with a bank.

There's going to be a higher interest rate for multifamily properties - probably give or take 0.5% higher. Also, if you are putting less than 25% down (for agency at least) on an investment property you will have a higher rate as the pool of willing lenders thins out (primary homes can obviously go much lower). Your rate will be a bit higher if it's a jumbo loan (generally meaning over $550k loan for SFH except i a few high-cost areas). Conversely, on the amortization lowering the amort below 30 yrs will generally give you a better interest rate, but that is harder to swing for most investors given the higher monthly debt service payments. So a 20 or 25 year amortization could lower your rate substantially.

So, if your property was a small apartment building (duplex or quad) or was a jumbo SFH with only 10%-15% down then 4.875 might well be a good rate. However, if this was a more cookie-cutter non-jumbo SFH w/ say 25% down then 4.875 is too high in today's market.

I just got a quote for a 4.25% SHF investment home in Durham a couple days ago (30 yr amort/25% down) and another quote of a 4.75% for a duplex (both 30 yr. amort / 25% down).  Send me a DM and I'm happy to send you the contact info of the broker.

Another good recommendation is to go to bankrate.com and see what they spit out. Sometimes there are cut rate lenders with hidden fees and so their rates are lower than realistic, but in general you can get some good info on there. Just close pay attention to the search parameters (like specifying an investment property, paying for points, etc.)