multi-family LTV and interest rates...

[NowhereButUp]

Hi all!

I'd like some advice about multi-family LTV and interest rates...:

I have a three-family home that is also my primary residence. Closed March of 2013 on FHA 30-year fixed @ 3.25%, current balance $261k. My FICOs are 750+. FHA mortgage insurance is $270/month (1.35%??). Zillow, likely optimistically, claims the property value is $384k.

I need to do serious remodeling/renovation that - along with eliminating or reducing the PMI cost - has me looking at a 30-year fixed conventional cash-out refi. So far I've contacted a credit union and my current lender (Wells Fargo). Both have 75% LTV limits on 3-family homes but I really need at least 80% LTV...even if I need to pay some more PMI for awhile.

I'd also like to do this without raising my interest rate too much. When I closed three years ago my FICOs were about 100-points lower, so even though rates have gone up some I'd hope I can keep my rate reasonable...but Wells told me I'd be at least 1% higher even with my better scores.

So, has anyone heard of >80% LTV and 3.5% interest for decent credit in 2016's market?

Thanks in advance!!!

[ShanetheMortgageMan]

The highest cash out LTV's are from Fannie/Freddie, which both cap it to 75% for 2-4 unit owner occupied properties (70% LTV for non-owner).  Conventional interest rates are also higher than FHA's, assuming the same exact scenario.  With FHA there isn't any hit to the rate for cash out or multi-unit properties, but with conventional financing there are hits to the rate for both.  That is why you are having a tough time finding what you are looking for with conventional.

You should look into the Fannie Mae HomeStyle renovation loan program, which is conventional financing for the sole purpose of renovations.  The program will go up to 75% LTV on 2-4 unit properties.  The calculation for the LTV requires a worksheet to be completed, which you can find at https://www.fanniemae.com/content/guide_form/1035.pdf.  With this type of loan you need to hire a general contractor who will be reviewed/approved by the lender and will be in charge of the renovations.

If neither of those appeal to you, then FHA financing will do cash out to 85% LTV on a 1-4 unit primary residence.