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we have a final conditional investment loan approval, but the lender wants us to pay 4 points with 30% down with an interest rate of 5.875%. we feel we're paying way too many points?
To get a 5.875% rate you aren't, if you don't want to pay that many/any points then it'll be upper 6's. Investment loans have much higher interest rates because owner occupied properties tend to be taken much better care of, won't be the first home someone ditches in rough financial times, etc.
thank you. the bummer is that we have always maintained that it will be owner occupied and not an investment property. so many variables, creative financing and scenarios were used and this is the only way we can qualify.
however, the lender stipulated that 2 properties must have sold within 90 days of the appraisal of the purchase property with comparable numbers. for sure there's one, now the appraiser is looking for another. this is the last hurdle.
do you know if the points can be claimed on taxes being that this is an investment type loan?
I think it is a high rate. I just did a loan app on a client buying investment.... rate was 7.125 with 0 but with 1 point, she got 6.5%. At 20% down, rates are higher, but once you put more than 25% down, rates should be good.
One thing... loan amount does affect rates. The less you borrow, the higher the rates... especially under $60,000
You know I think they can since it'd be an investment property.. but then if you move into it soon after perhaps they could not. You are caught between a mortgage lenders definition of occupancy vs. the IRS's.
I think it is a high rate. I just did a loan app on a client buying investment.... rate was 7.125 with 0 but with 1 point, she got 6.5%. At 20% down, rates are higher, but once you put more than 25% down, rates should be good.
The lower the rate, the more, exponentially, it costs. So buying rate from 7.125% to 6.500% might only cost 1 point, but buying it down to 5.875% won't only cost 2. I'd be hard pressed to ever advise paying 4-5 points to buy down a rate though.
I agree... 2 point is only about 6.125. I would take 6.5 with 1 on an investment before 5.875 with 3 or 4!
To the original poster... we need a loan amount to better advise you but I think you should shop around.
Also, of course your credit impacts the loan - give us an idea of where you stand
the application went in @ 6.375% to the lender, but somehow the debt ratio (i think that's what it was called) made it to where we couldn't qualify. something about being over/under 60%. with the interest rate at 5.875%, it came under the 60%.
guess, we'll have to wait until monday to ask our cpa about the tax question. but, shane's answer sounds somewhat familiar.
It sounds like a pretty good loan from a credit and ltv stand point. DTIs around 60 are tough but since your loan doesn't have pmi, it's possible. Ask if the loan is scoring AUS approved (approved automatically). With your down payment and credit score, it might. If so, shop the rate because if one lender is getting an AUS score, other will too. It's a good idea to shop any way when the points or rate seem high.
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