Patrick.net

How to get the best mortgage rate when buying a rental property?

By Patrick   Follow   Sat, 30 Jun 2012, 1:35pm   1,396 views   7 comments
In Menlo Park CA 94025   Watch (1)   Share   Quote   Permalink   Like   Dislike  

A reader asked me how to get the best mortgage rate when buying rental property in the central valley near LA.

What are the tricks? I know lots of lenders like to advertise ridiculously low rates but then say you're not qualified, or have big points and fees in the small print.

Viewing Comments 1-7 of 7     Last »     See most liked comments

1. HL Follow Befriend 1 comments

   1   3:06pm Sat 30 Jun 2012   Share   Quote   Permalink   Like   Dislike   Hey All: 1. Looking for help from the gurus of real estate science....need to know what to look out for on rates, Apr, etc. ...and how to avoid getting sucked in. 2. What are the best lenders to approach? Are there any online sites you might rec=9mend?

2. bmwman91 Follow Befriend (7) 37 threads 1,522 comments Mountain View, CA bmwman91's website Premium

   2   4:19pm Sat 30 Jun 2012   Share   Quote   Permalink   Like   Dislike   From all that I can see and have read about the current market, you pay CASH for investment properties. Mortgages for rental properties sound very difficult to obtain at all, and I would imagine that it is even more rare to get a slamming deal on the rate. On top of that, you have to compete with cash sellers to get at the rental properties, and the number of cash investors is not unsubstantial.

3. Patrick Follow Befriend (54) 5,181 threads 6,153 comments 46 male Menlo Park, CA Premium

   3   4:25pm Sat 30 Jun 2012   Share   Quote   Permalink   Like   Dislike   True, the cash investors are more attractive to the sellers, and banks are nervous about lending for investment in real estate. You might be better off just talking to any individual rich-ish people you know and getting them to write a check in return for a share of the rental income.

4. REpro Follow Befriend (1) 22 threads 469 comments San Jose, CA

   4   4:42pm Sat 30 Jun 2012   Share   Quote   Permalink   Like   Dislike   Typical cash investor have limited amount of cash as well as limited purchasing criteria. The biggest completion now are cash investors who actually works for banks, where is no limit to cash supply. When mortgage is considered, winning bid most likely be above appraisal value and you will have to come with more cash to get approved by lender. Additionally your ROI may become too slim and not worthy of risk involved.

5. YesYNot Follow Befriend (2) 15 threads 428 comments Reston, VA

   5   5:37pm Sat 30 Jun 2012   Share   Quote   Permalink   Like   Dislike   i checked on investor rates recently. boa gave me 5.75 apr with 0 pts for 70% loan to value. i think amerisave quote was 5.1%

6. E-man Follow Befriend (31) 34 threads 2,542 comments San Jose, CA Premium

   6   9:43pm Sat 30 Jun 2012   Share   Quote   Permalink   Like (2)   Dislike   There are no tricks. For SFH, townhouse, and condos, interest rate is typically 0.5% higher than O/O based on a 75% LTV. For duplex and 4plex, it's about 1% higher. for 5 units or more, about 2 points higher the last time I checked. If you want no points, no costs, interest rate will be another 0.25 to 0.5% higher. It depends on the loan amount. A $70k loan is definitely more costly to get compared to a $700k loan. You weigh your options between the lowest interest rate with point(s) and costs, or a slightly higher interest rate with no points but pay cost, or even a slightly higher interest rate with no points and no costs. There is no one size fits all. Figure out your break even timeline with paying points and costs and go from there. Personally, I'm not a fan of paying points. I don't mind paying costs if it's minimal. If it is substantial, I go with a higher interest rate with no points no costs. With respect to who is the best lender, any lender that's willing to loan me the money at a comparable rate with the least amount of BS paperwork is the best lender. I don't care if I have to pay 0.25%-0.5% higher. It's the cost of doing business. As long as you can make money with borrowed money, why would you care much? What are your alternative options? Be realistic. You should be happy that someone is loaning you the money for 30 years at 4%-5% fixed interest rate. That's all I got for now. Good luck. :o)

7. robertoaribas Follow Befriend (23) 55 threads 3,753 comments Scottsdale, AZ robertoaribas's website

   7   5:39am Sun 1 Jul 2012   Share   Quote   Permalink   Like   Dislike   E-man is spot on. you will need 20 to 25% down, depending on how many mortgages you already have, and your credit rating. They will examine everything and I mean every ridiculous thing about your financing. My last investor loan came in at 4.75%, when owner occupied could habe beaten 4%.