Good credit, so-so rates?

[Kevin Drouillard]

Hello BP, I'm purchasing a rental from a turnkey provider in Chicago, as an out-of-state investor. I recently locked in a mortgage rate of 5%. However, I'm wondering why did I even receive such a relatively High rate with my credit score being 780 +? I thought having good credit makes you get a lower interest rate. Did I do something wrong? I put 20% down. I understand putting 25% down will lower my interest rate, but even with my score with 20 down, it just seems a little higher than the 4-4.5% than those online mortgage finders. Any thoughts on this?

[Chris Mason]

Less than 25% down payment for an investment property is the 2nd worst loan-level pricing adjustment (LLPA) of them all. Equivalent to having a 620 FICO and putting 5% down for an owner occupant. Page 2, table 2, direct from fammiemae.com (as it's from Fannie at the top, lenders generally all have the same LLPAs - or worse - but not better). 

Those numbers you see, the 3.375% in this case, is how many discount points it would take to hold constant your interest rate. If you do not want a bumped rate at all, it'll be 3.375 discount points.

If you only want your rate bumped to where 25% down investment property would fall, without putting 25% down, it's 3.375% - 2.125% = 1.25 discount points. 

Or you can do the standard 25% down.

If you want to know what the very worst loan level pricing adjustment is, ask your lender where 15% down would fall in terms of interest rate.