Investment Property Mortgage?

[Jazzzy]

Hi all,

Wondered if any of you have looked into mortgages for investment/rental property. We are looking at a 3-unit property.

Any advice on what mortgage lenders/programs may be available? Down payment amounts? Interest Rates?

[ShanetheMortgageMan]

For non-owner occupied/investment/rental properties only conventional financing exists - so FHA, VA & USDA would not be options.

Conventional loan programs that offer the most favorable terms would be conforming loan programs, that would be the programs that Fannie Mae & Freddie Mac have put forth.

25% down payment is the requirement on 3-4 unit non-owner occupied properties, for 1-2 units you can still find 20% down but anything less than 25% down results in very high (relative) interest rates.

There is an adjustment of 1.000 points for a 2-4 unit property at most lenders, meaning if you were buying a 1-unit property vs. a 2-unit property, you could get the same rate as the 1-unit property but would have to pay 1 more point than the 1-unit property scenario for it.  On investment properties with a loan-to-value of 75% or less, there is a 1.750 point adjustment, meaning you could get the same rate as someone who was buying a primary residence but would have to pay 1.75 more points to get it.  At loan-to-value of 75.01 to 80% the adjustment is 3.000, so pretty significant to save 5% down.

 With 25% down, 750 mid FICO, you could probably expect rates of around 6.25-6.5%.

[Jazzzy]

Shane, thanks for the information.

We have talked to one local lender willing to keep the loan in house. He stated 5.75% but amortized over 15 yrs with a 5 yr balloon. We didn't yet talk about down payment, points, etc. I know that the devil is indeed in the details. I don't think the 15-yr amortization will work for us...but that 5.75% would have been nice.

Thanks again.

[ShanetheMortgageMan]

Welcome.  Interesting mortgage offer with the 5-year balloon - if you were thinking about 15 year terms then 5.75-6.25% would be more appropriate.  You can get the 5.75% rate without the 5-year balloon FYI.

[Anonymous]

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