Quoted over 8% interest rate for owner-occupied fannie mae 5% down 4plex

[Johnny McKeon]

Hey BiggerPockets family,

I was just approved for an owner occupant, Fannie Mae, 5% down with a purchase price of $1.3 million for a 4plex in the Phoenix Metro of Arizona

My middle FICO credit score is 759

My current DTI debt to income ratio is 30%

I have enough down payment, closing costs for the subject property, and enough liquid reserves for all 10 of my apartment buildings totaling 45 units in PHX Metro AZ

my mortgage lender quoted me with a rate at 8.125% with me paying 0.156 points totaling $1,920

My question is,

does this 8.125% interest rate sound reasonable for an owner-occupied fourplex 5% down Fannie Mae conventional loan as of March 27th, 2024, at 1700 hours?

What has everyone else been quoted or

What is everyone else seeing/hearing with interest rates for

owner occupied fannie mae 5% down for a 2 to 4 unit property or with other low down payment owner occupant loans such as FHA or VA ?

I thought owner occupied loans are supposed be lower interest rates then non-owner occupied loans or DSCR loans

also, I asked the lender if she could adjust the purchase price to $750,000 to see if that would lower the interest rate and the interest rate actually went up to 8.625% and pay 0.353 points 

I'm thinking I should find a mortgage broker that can quote me with multiple lenders to shop the rate and loan costs instead of a direct lender 

Thank you for the help!

[Derek Brickley]

Hey Johnny!  

I'm not sure who you're working with but the fact they are showing you their par pricing is actually a great sign.  I closed on a househack in December at 8.625%.  The main difference right now that you would see between a primary and an investment property is the fees.  You would probably have the same rate on an investment, but you would be paying 2-4 points for that.  

You can always consider buying down the rate, but the reason we don't recommend it right now (and the reason I didn't in December) is because your recoup period on paying points in generally 3-4 years right now. Of course we don't know the exact time it will take rates to drop, but the expected time frame is 6-12 months.  It never hurts to get other quotes for you as a buyer though.  If you feel like a broker might be helpful, just be sure to take note of how much the broker fees will cost you.

[Zack Karp]

@Johnny McKeon

Nah that's crazy high. Not reasonable at all. I'm in the mid-6's for that exact same scenario with no points. Same program, Fannie 5% down.

Find another lender with reasonable terms. Feel free to reach out if you need any help.

Best of luck!

[Ryan Thomson]

@Johnny McKeon seems WAY high for right now. I would shop. 

[Grant Schroeder]

@Johnny McKeon that seems incredible high! Probably a retail lender I am guessing. At Movement Mortgage, we are in the 6s for a house hack like this since we are a direct lender and mortgage broker.

[Johnny McKeon]

Thank you for everyone's advice!

I closed on a 4plex in Mesa Arizona beginning of June for $1 Million taking advantage of Fannie Mae 5% down owner occupied loan. All units are 3bed/2baths. 2005 year built. All units were vacant but I've already rented two and I live in one so I have only one more unit to rent

I shopped around and I found a mortgage broker who was able to get me a 6.99% rate who took the loan to UWM (united wholesale mortgage). I'm a licensed Realtor who represented myself in this transaction and I negotiated a $15k seller concession I used for a 1-0 buy down so my rate for 1 year will be 5.99% and then revert to 6.99% for 30yrs. and then we used the rest of the concessions for closing costs. in 6 months or 12 months I will revisit to see if mortgage interest rates dropped significantly to justify a refinance to lock in a lower interest rate

one more question. What rate percentage drop would justify executing a refinance to lock in a lower interest rate in your professional opinion?

Thank you again for all your help.

[Zach Wain]

@Johnny McKeon - nice work!  I was about to say todays rates with no points on that scenario is in the high/mid 6% range.

For a refinance, its a combo of rate drop/payment reduction and the loan costs for the refi.  I often refi people with a 0.5% rate drop and no closing costs.  Its an immediate savings, no worry about having to wait 3 years in the loan to offset the massive closing costs some lenders charge for a lower rate.  Savings vs cost!  Whatever makes sense to you, but I would jump at a free refi of 0.5% or more.

[Johnny McKeon]

Thank you @Zach Wain for your explanation when you think it's best to jump on a refinance. if rates trend another 50 to 100 basis points lower I'll look at a refi for sure

how do you do a no cost refi? is the cost baked into the loan or the interest rate? 

[Zach Wain]

Quote from @Johnny McKeon:

Thank you @Zach Wain for your explanation when you think it's best to jump on a refinance. if rates trend another 50 to 100 basis points lower I'll look at a refi for sure

how do you do a no cost refi? is the cost baked into the loan or the interest rate? 

 Correct.  Its not always a perfect no cost, sometimes it a low cost refi, or sometimes the lender credit can be larger then the costs and its actually a negative cost refi.