I was wondering whether or not I should expect to pay a higher interest rate on a SFR loan if it is going to be for investment purposes? If so how much more should I expect to pay and also what kind of down payment would I be looking at. The home is move in ready and I plan on renting it out. Any advice would be appreciated.
I was wondering whether or not I should expect to pay a higher interest rate on a SFR loan if it is going to be for investment purposes?
Yes. Lender’s charge a higher interest rate on N/O/O properties as they are a greater risk.
If so how much more should I expect to pay and also what kind of down payment would I be looking at.
The loan parameters will be based on the overall scenario. (i.e. credit score, Debt to income, assets, etc.) There are loan programs for N/O/O that are available up to 100%.
mdhaas-
Thanks for the info. What I am trying to do is figure out the PITI on a home that I am currently thinking of buying as a rental. It is just kinda hard to accurately do without having a lender run your credit. Do you have any suggestions on how to get a pretty accurate measure of this?
at 8% you can expect your piti to be about 1% of the purchase price
Well the most accurate way would be to run your credit. Most places don’t charge for this although it does cost them money to run your credit. They just hope to make it all up when they do the loan. Running your credit can drop your score by about 5 points which is really no big deal if it’s high…
For a general idea, you could be talking as low as high 6’s for your primary 70-80% mortgage and the kicker is getting the rest of that 20-30%. Banks like it when you have a nice down payment and really kill you when you get close to 100%. How about 10-12% depending on your credit? There are also some investment programs that are 75-80% LTV and if you pay points, low 6’s. There’s usually a catch with those like a ballon at 12 years or something.
What I am trying to do is figure out the PITI on a home that I am currently thinking of buying as a rental.
What is the Purchase price and we can figure a rough P/I payment.
The purchase price is 89,500. I have excellent credit 750-760.
Can anyone help me calculate the PITI for this home?
You have to supply the information for the variables:
P/I for a rental at $89,900 at 7% would be:
70% loan - $418.67
80% loan - $478.49
90% loan - $538.30
The T (taxes) would be 1/12th of the annual tax bill per month
The I (insurance would be 1/12th of the annual insurance premium for the property.
We don’t know what kind of taxes you pay where you are or what kind of insurance rates you’ll get. It’s even kind of a crapshoot as to the rate that your lender will give you not knowing much about you or your credit history or how much stuff you already ahve leveraged…these rates can vary wildly between individuals and geographic regions…the math is easy, collecting the variable amounts is the task. My credit score is higher than yours and I can get about 6.5% on an 80% for an investment property last I checked.
Keith
Heres a general question talking about shopping around for rates.
If you have already run a credit check on yourself, ie pulled your own credit report from whom ever on the web, can you tell the mortgage brokers/banks to accept your copy (of course as long as it is relatively current) so that way you won’t have 5-9 different credit checks showing up, until you decide to actually use a specific lender, then they can pull your credit for their lending needs.
Thanks
You’re better off letting the mortage broker pull your credit. Most people don’t really know how to read their report and the brokers do it all day long. A good one will explain various items on the report to you. Also even if you apply to 5-9 different lenders, if you do it all within a 2 week period, it only counts as one credit check. When you check your own report on the web or whatever for free, it usually doesn’t include your Fico score, you usually have to pay for that. Most lenders don’t charge anything up front to pull your report although it does cost them money to do so. One thing to keep in mind that everyone doesn’t seem to get is that rates change every day. It’s sorta like checking on the price of a stock. If you spread out those lenders over a two week period, one guy is going to have better rates, but that may be because you picked him on a better day.
I think the bottom line is that lots of people are concerned about this, but it’s really a minor point. Having your credit pulled will eventually lower your score by about 3-5 points. That usually isn’t enough to push you into a lower bracket, but even if it did, there’s really no way around it, credit needs to be pulled in order to do the loan.
HenryinMa,
Thanks for all the insight. I suppose when it comes to peoples credit, everyone wants the best and afraid of anything that may drop it, even if it really is insignificant.
Great Post and Thanks!!