0.625% Interest Rate Increase -- Is this normal and expected?

[Michael Tan]

I have been working with a lender who gave me a 30-year fixed rate quote of 5.35% for an investment duplex (through Freddie). I actually signed an initial set of disclosure docs to agree to this rate for a duplex that I'm closing on.

The lender reached out to me with new documents today stating that there is a change in loan terms. He explained that they ran the initial numbers assuming that the property was a 1 unit investment property, and that the new rate for a duplex will be 5.875%.

I have a hard time believing this is the best rate I can get.

My question for those investors that are more experienced with long term multifamily rentals: is this sort of rate expected? How would you advise I proceed now? There is still time to shop around before closing -- I've already contacted some of the other lenders I work with to try and get a rate from them, but am skeptical that a similar situation might arise (they promise one rate, switch to another prior to closing).

Relevant info: loan amount is for $51,750 (with 25% down). Middle credit is 723.

Thanks!

[Michael Tan]

Thanks, @Jacob Sampson, @Shaun Weekes, @Frank Wong, for your replies.

I wanted to follow-up with an update on this situation. The lender's projected rate shot up drastically once I made the post, but after the appraisal came back (exactly the same as list price), the rate dropped back down to what it was before (5.35%).

I ended up buying the rate down to 5% at a $230 fee.

I'm still not entirely sure why the rate shot up so high, but I guess the takeaway in this situation is to not panic until you have rate lock numbers from the lender. Additionally, I should have shopped around some more. I was in contact with multiple different lenders, but given how painful each of the various loan applications are to fill out, I got lazy and didn't bother to follow-through to the point where I could get accurate quotes.