patrick.net

Sounds like you are getting an investment home rate, not a second home rate. Is the property a rental or is it located near your primary home (i.e withing 50 miles)?

This is a single family detached home that will become a rental and yes, it is well within 50 miles of my primary residence. What difference does that make?

BayArea says

that will become a rental

BayArea says

What difference does that make?

That explains it. Lenders are not so enthusiastic about loaning on rental properties.

From what I understand, the 50 miles just a guideline, not a hard and fast rule. It's just used as an indication on whether the property will be used as a rental or a "vacation/second" home.

If by chance you have your primary home paid off, you could probably deem the new home as primary, but otherwise you probably will be facing the investment rates.

BayArea says

Can anyone shed some light on what may be typical here

3/4 to 1 point is typical.

Ducky,
Your forgot to click 'Investment property' from the drop down (instead of 'Second Home').

yeah, I know you're right on this. Everything's so depersonalized these days, the corner bank manager know where all the money is is like 19th century thinking.

Thanks for all the feedback!

It seems to me that as soon as you say "investment" your done for and you get hit with that additional 1% by the lender.

However, the following might be options to keep the lower rate

a.) As mentioned above, simply declare this as a 2nd home (the cats comment above made me chuckle)

b.) Specify that this new property will be the primary residence and the old property will be the investment

Does anyone see any problems with this? Once the loan is goes through, I can't imagine renting the unit out would cause any problems as long as the bank is getting paid without hickups.

make your mortgage payments

I watched the Oakland protests. Very strange I thought to myself looking at the guy in military boots on the stage with the Australian outback cowboy hate. I just love the smell of napalm in the morning. I thought. It wasn't just the plain incompetence of the fakeness of it all. It was more of boots on the stage.

Seemed mostly ok everywhere else but Greece. The peacefulness of it all. The Saudi cash. What have we here I was thinking. Looks like a start to something. See what you can do to get things stirred up out there. The people of California said oh fuck.

Greece just shit their pants. I looked on as the smell burgeoned outward. Run I thought. I hate that smell. Cue the simple minded usury news and financial news. Let us alone I thought.

As mentioned above, there seems to be three types of loans that the bank considers:

1.) Primary Home
2.) 2nd Home
3.) Investment

I just spoke to WF Home Mortgage and they confirmed that the rate will be identical for the first two cases and higher for the third case above.

They also cited the 50mile rule for the "2nd" property although this is not set in stone. Other factors are also considered. For example, when you tell the bank that you are purchasing a 2nd home, they want to see that the new home is larger, more expensive, and/or outside of 50 miles. Otherwise the "investment" light bulb goes off.

A good option seems to be specifying that the new property is your primary and the existing property will become your rental. Just keep in mind that you may be rejected if the new property is not bigger, more expensive than the previous property, or outside of 50miles radius...

I think calling this fraud is a bit extreme. If we want to talk about real fraud, we can't ignore that so many of us are victims of the fraud that's played the part in the real estate bubble.

Anyway, it's all been very educational and eye opening talking to loan consultants, real estate agents, and reading this forum.

BayArea says

I think calling this fraud is a bit extreme.

And again, if you are lying on a mortgage app, you may be committing a crime, potentially a serious federal one.

18 USC 1010
18 USC 1014

People lie all the time about these things, but that doesn't mean it's not fraud.

Investment property rate, banks charge higher rate because there is a higher chance of you walking away from it. Much higher risk on their part.

SFace says

Obviously if you are living in Lafayette and tell them you want to live in Antioch instead when you can fully afford it, you'll need to come up with something more compelling.

It will certainly raise an eyebrow, but if that home is larger than the one in Lafayette, now you got a pretty good case. You may be asked to write an official letter stating your intentions for the new place however.