Better lenders in Rochester NY?

[Jay Wu]

Hello BP, my partners and I are currently under contract to buy our first investment property (duplex) in Rochester NY. We’re putting 20-25% down on this $130k property. Our current lender came back and told us our rate will start at 4.75% for 30 fixed, we’ll be charged 2 pts and total closing costs less prepay will be around 10k. To me, the rate seem quite high given the recent 50 bps cut and possibly another 50 bps cut on Mar 18th. The closing costs seem higher than usual as well. Does anyone with experience in Rochester agree with these costs? Would be great to hear your opinions and possibly introduce me to better lenders. Thanks in advance!

[Stephanie P.]

@Jay Wu

Sounds like it's not necessarily Rochester that's the issue  but the structure of the deal.  

Let's analyze it for a moment.

• You've got a partnership, so I'm assuming you're buying in an LLC.
• You're buying a duplex with 20-25% down, so it's not Fannie Mae meaning it's portfolio money.  
• I'm also assuming no tax returns so it's a no income verification loan.  
• You live in Fremont and you're buying in Rochester so it's a long distance investment property purchase=risky

Roll those together and you have a good rate and point combination at 4.75% and 2 points.  Closing costs on portfolio loans are high; no getting around it.  Some of the larger wholesale lenders in that space will charge you $1995 just to underwrite the loan and another $600 to close it not to mention the environmental survey as well as the cost of the appraisal BEFORE you even get to the measly 2 points the broker's going to make.  Some charge entity review fees around $750.  This is a tiny portfolio loan in a relatively tertiary market with an out of state (by a long shot) investor. 

Regarding the decrease in rates by the fed, the 50 bps doesn't necessarily translate into a reduction in mortgage interest rates by half a point.  Here's a great article that illustrates what I'm writing about. 

http://www.mortgagenewsdaily.com/consumer_rates/937579.aspx

If the cash flow numbers work, take the 4.75% and close.

Best of luck

Stephanie