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Old 10-22-2008, 01:00 PM
 
Location: Charlotte, NC
523 posts, read 2,453,978 times
Reputation: 358

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I just found a great deal on a builder inventory home. I talked to builder's mortgage rep and was told that to buy it as an investment property, I have to put 20% down and get a 7% mortgage with 2 discount points. This sounds insane. Is this really where we are with investment loans? 20% down at a minimum with way higher rates/costs on the mortgage?

I have great credit, debt ratios, reserves, etc. Are there no better loans out there for someone like me? The credit crisis sucks!
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Old 10-22-2008, 02:14 PM
 
Location: New York
2,223 posts, read 3,883,508 times
Reputation: 1574
Anu2

For investment properties - presently 20% down is a banking standard. The 7% with 2 points going to the broker, bet they are also making YSP (an additional 1%).

Mention you have been talking with other lenders, if they want your loan, you want lower costs.

Tell your broker you want to buy the interest rate down. I predict he will give you some objection, because you will be cutting into what they are earning. Depending on what state you are in, states have limits on how much total closing costs can be charged. Buying down the rate is figured into the total closing costs.

When you buy the rate down - the result will be a lower interest, saving you thousands over the life of your loan.

Also when you are in your loan - you want to send one extra payment a year, this will cut 7yrs of a 30yr loan. Saving your even more......


Good luck.....
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Old 10-22-2008, 03:59 PM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 5,893,437 times
Reputation: 952
Quote:
Originally Posted by Modification Specialist View Post
Anu2

For investment properties - presently 20% down is a banking standard. The 7% with 2 points going to the broker, bet they are also making YSP (an additional 1%).

Mention you have been talking with other lenders, if they want your loan, you want lower costs.

Tell your broker you want to buy the interest rate down. I predict he will give you some objection, because you will be cutting into what they are earning. Depending on what state you are in, states have limits on how much total closing costs can be charged. Buying down the rate is figured into the total closing costs.

When you buy the rate down - the result will be a lower interest, saving you thousands over the life of your loan.

Also when you are in your loan - you want to send one extra payment a year, this will cut 7yrs of a 30yr loan. Saving your even more......


Good luck.....
I highly doubt that the broker is making 1.000 in YSP at 80% loan to value on an investment property, especially depending on the type of loan program (15 or 30 yr fixed, ARM, etc.). Of course without knowing further information I cannot say definitively as you continually seem to do without any relevant info.

That being said, based on the assumption of a 720 FICO at 80% loan to value (at least in Clark County, NV) 7% on a 25 day lock (with one of my lenders) will cost 1 discount point and 7.375% is par (no YSP or discount points). At 75% loan to value the terms get much better.

Keep in mind that the rates I quoted are based on a number of assumptions. The loan program, location, loan amount, and FICO will affect the actual rates you may receive.
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Old 10-22-2008, 07:28 PM
 
4,066 posts, read 10,827,561 times
Reputation: 2257
Quote:
Originally Posted by Anu2 View Post
I just found a great deal on a builder inventory home. I talked to builder's mortgage rep and was told that to buy it as an investment property, I have to put 20% down and get a 7% mortgage with 2 discount points. This sounds insane. Is this really where we are with investment loans? 20% down at a minimum with way higher rates/costs on the mortgage?

I have great credit, debt ratios, reserves, etc. Are there no better loans out there for someone like me? The credit crisis sucks!
IMO, and obviously the opinion of the GSE's and investors, at least 20% down should always be required on investment property purchases. Credit crisis or not. There is a lot more risk on investment properties.

Put down 25% and you should save on the points.
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Old 10-22-2008, 07:37 PM
 
4,066 posts, read 10,827,561 times
Reputation: 2257
Quote:
Originally Posted by Modification Specialist View Post
Anu2

For investment properties - presently 20% down is a banking standard. The 7% with 2 points going to the broker, bet they are also making YSP (an additional 1%).

Mention you have been talking with other lenders, if they want your loan, you want lower costs.

Tell your broker you want to buy the interest rate down. I predict he will give you some objection, because you will be cutting into what they are earning. Depending on what state you are in, states have limits on how much total closing costs can be charged. Buying down the rate is figured into the total closing costs.

When you buy the rate down - the result will be a lower interest, saving you thousands over the life of your loan.

Also when you are in your loan - you want to send one extra payment a year, this will cut 7yrs of a 30yr loan. Saving your even more......


Good luck.....
How does buying the rate down cut into the originator's earnings?
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Old 10-23-2008, 05:34 PM
 
Location: Cary, NC
1,036 posts, read 3,519,409 times
Reputation: 502
Quote:
Originally Posted by TimtheGuy View Post
IMO, and obviously the opinion of the GSE's and investors, at least 20% down should always be required on investment property purchases. Credit crisis or not. There is a lot more risk on investment properties.

Put down 25% and you should save on the points.

Good advice... the 20% down is a standard because MI companies no longer want to insure investment properties. I know lenders that will approve to 90% LTV, but since they can't find an MI company to insure it the loan can't be done.

But what Tim said is good... ask for a quote with 25% down. Its a small change, but Fannie Mae changed pricing on October 1st. The pricing adjustment on 20% down loans jumped significantly, whereas on 25% down it only increased by .25 points. This makes a HUGE difference in pricing between 20 and 25% down investment property loans.

Investment properties do carry a high amount of risk. The fact that some lenders were doing it to 100% and without large reserves was crazy. One home repair or vacancy was a disaster for the "investors" in such cases.
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