What kind of interest rate to expect on first investment property

[Jonathan Steiger]

I know a lot of things have to be placed into consideration and every individual will not be the same, however generally, what interest rate should I expect on my first investment property?

Don’t currently own a house (first time home buyer) and the property is a duplex. We will not be house hacking, as we currently travel for work.

One bank is offering 5% with 25% down and another is offering 5.5% with either 20% or 25% down. Both banks are saying that is pretty standard.

I feel like they aren’t even accounting for credit score or financial situation. They just act like it’s a pretty standard rate.

Do you think it is possible that we get a lower interest rate in this situation, say 4.5% ?

[Chris Mason]

Originally posted by @Jonathan Steiger:

@Chris Mason I love your college degree analogy! Makes a lot of sense though, thanks for explaining all of that. (1) Yeah, we plan on owner occupying one once we are done traveling. Just not quite yet. Good idea about buying rate down as well. Appreciate your insight.

(2) What's your take on establishing an LLC? Is it a good idea at this point as new investors on our first property? At what point in our investing career is the best time to establish?

 (1) Oh, actually that changes things. Buy it at zero points, see if you can get them to bump the rate in exchange for covering some 3rd party closing costs to boot. This is a short term mortgage, keeping fees down matters more than keeping rate down. As soon as you move in & have your bank statements, paystubs, etc, reflect your new primary residence address, refinance into an owner occ mortgage w/ the lower rate. The only way this blows up is if the era of historically low rates ends between now and when you move in (they've been saying "next month it'll happen!" since 2012, I have no crystal ball).

(2) When you tap out of FNMA loans is the most natural time. The cap is 10 per person, yielding 20 per marital unit, or 10 per marital unit if you do all joint mortgages.