Four Unit Multi-family, Owner Occupied Investment, Loan Interest Rate Question

[Michael Allen]

Hey everyone!

I'm not new to purchasing properties, but this will only be the second property I've ever purchased and the first in this new area. My first property was a Single-Family home right before the pandemic in late 2018. 

I've gone through the process of shopping out a loan for the property and it was decided that I'd go with a loan originator who initially told me the interest rate would be anywhere from 5.5-6%. Now I'm being told that the interest rate is more realistically going to be 7.125-7.6%, which makes the purchase significantly less desirable.

So my question: Is 7.125% market rate or is this something I should be looking into?

Necessary Stats:

Credit Score: 740+
Loan Type/Amount: Conventional/$320K
Projected Income: $3100 (including me paying myself rent)
Down Payment: 5%

Let me know if there is extra info needed and thanks ahead of time for any advice that is offered!

[Jason Wray]

Michael,

The quote you have from that loan officer is a bit high for that credit score. It is typical though because when you use a "loan officer" you are using a "lender" who essentially is the middleman. The loan officer is in a loan officer compensation plan under a branch that has a "branch bucket". That means (2) people have to get a commission for you to use that Lo at that lender.

When you use an FDIC Bank you avoid having to pay points and you get the "PAR" rate. Bankers are not allowed to charge points on traditional loans so you save money in closing costs and end up with a lower rate. Lenders have to sell their loans to big banks or servicing companies to get paid.

Feel free to reach out if you have any questions because there are ways to check to ensure you are not over paying.