Negotiating mortgage rate? Amount?

[Jonathan H.]

Hi guys,

I am looking to do my first property purchase within the next 3 months but have a few questions about the mortgage rate and amounts.

Im just curious to know how to negotiate these?

Example:
If I want to purchase a 4plex that I will live in, my salary is $100K

-will there be a max amount that I can borrow? Will it vary from lender to lender?

-Can you negotiate the interest rate? If so, how?

-What if I change my mind and want to purchase as an investment (6-8 units) will my loan still be valid with a larger amount down?

Just hoping to start a discussion for newbies about mortgages and hopefully it can help others at the same time.

thanks

[Bryan Hancock]

Jonathan...I think approaching mortgage brokers is a good idea if you intend to hold the property for a long time. The extra expense in finding the right loan product for your specific needs is worth the fee of a good broker IMO. Amerisave.com is a great place to start for any 1-4-unit property. They will give you a point and rate matrix for your loan scenario and allow you to choose the perfect product. The Mortgage Professor also has calculators to tell you the breakeven amount of time to hold to the second decimal place.

For property greater than 4 units it is a whole different ball of wax and the underwriting will be different. Read through the forums....there is a ton of information on this already.

Originally posted by Jonathan Horng:

Im just curious to know how to negotiate these?

You pick the right lender for your loan scenario. Different loans will have different lowest cost lenders. The "nichification" is discussed on The Mortgage Professor's site if you look for it. Amerisave.com will get you close to the floor rate in my experience. If a rate minimization is your goal due to a lengthy hold period you will want to request zero yield spread from the broker too so that they can find you the lowest rate in trade for more up-front fees.

Originally posted by Jonathan Horng:

-will there be a max amount that I can borrow? Will it vary from lender to lender?

This really depends on what your debts currently are. There are front-end and back-end ratios you need to qualify for. 2.5X gross income is generally the number thrown out there for what you can qualify for though. So this would be $250kish for your salary if you are qualifying without a co-borrower. You may be able to get more than that with rates so low right now.

Originally posted by Jonathan Horng:

-Can you negotiate the interest rate? If so, how?

The best way to "negotiate" is to start with the right lender to begin with for your loan scenario.

Originally posted by Jonathan Horng:

-What if I change my mind and want to purchase as an investment (6-8 units) will my loan still be valid with a larger amount down?

You are going to have to start over with a commercial loan and the rules all change.