What kind of APR should I expect for preapproval?

Question

Hi. I am trying to analyze my first deal. I’m aiming for $200/month in cash flow. But the loan rates I am getting in pre-approval are about half a point higher than the proforma budgets I am seeing.

What APR should I expect?  I have no debt. No mortgage. I would qualify as a first time home buyer. My credit score is in the 800’s.  I have about $1,000/month in excess cash flow, which I’ve saved up in order to make a down payment.

I feel like I should be a good bet for a bank. But the rates seem a little underwhelming.

Am I missing something?

Stephanie P. · Answer

@Chris C.

If the current rates, that are still within a point or so from the absolute historic lows, are "underwhelming" now, wait 6 months when inflation starts to kick in.  Hopefully we're not going to have to endure Jimmy Carter like rates, but you never know.

http://www.freddiemac.com/pmms...

Johnny D. · Answer

@Chris C. I'm not sure what rates you are seeing and what lenders you are talking to, but if you haven't already done so, I recommend making a list of all of the small, local banks and credit unions in your area and calling each of them (should take about ten to fifteen minutes per call) to discuss their rates and closing costs.  This could take a bit of time to call all of them, but it can save many thousands of dollars between closing costs and mortgage payments over time.  I've bought houses in many locations, and I've yet to find an area that didn't have at least one local bank or credit union with great rates, but the key is finding who that lender is for your area.  If you are reaching out to large banks, the rates will often be a fair bit higher.

Matthew Crivelli · Answer

Conventional rate on investment properties are going to continue to rise. It's the opposite on the private side. I've seen rates in the 3's with private money if you're willing to buy the rate down. If you're steadfast on using a bank, do it now.

Bob Okenwa · Answer

Rates vary by lender, credit profile, amount of points paid, and down payment amount. I've read some individuals are seeing rates in the lower 3's up to the mid 4's. Money is still cheap right now. Compare the rates between at least 3 lenders and you'll have a better idea if the rates you are seeing are normal for your investment and your credit profile.