Rates on conventional loans?

[Cecilia Arnulphi]

Hello I am trying to get a sense of what a reasonable rate for a conventional 80%LTV loan would be (ballpark). I'm looking to buy out of state rental property. 20% down from my HELOC. I have excellent credit and I was able to obtain a 3.75%APR on my personal residence. I understand that for investment properties is higher but how much higher? I was quoted 5.1% but it seems too high. If anyone has any info it will be greatly appreciated. Thanks.

[Chris Mason]

@Cecilia Arnulphi

15%-20% down is acceptable to Fannie Mae, but the loan level pricing adjustment is absolutely horrible. 15% down being the most extreme, where your adjustment for investment property is nearly twice as much as someone doing 25% down would get hit with. 20% down is penalized about 50% more compared to 25% down.

Take a look, source is here from fanniemae.com.

Note that these are adjustments to price for rate, not to rate. That 3.375% means you could in theory pay 3.375% in discount points to make this adjustment go away. Otherwise, it's getting baked into your rate.

Several months ago, I actually did have a buy-and-hold investor that put 25% down and paid the 2.125% to get a sexy owner occupant interest rate. So it does happen. It's just rare and most people would rather take the higher interest rate.