Is this normal Or am I getting ripped off?

[Senad Salihovic]

I just got home from the bank, went to sign papers and go over everything before closing. 

detail.

single family rental  - buying for 40k with 20% down - conventional loan 30yr fixed

buyer agreed to pay 3% in closing = $1,200

Here is the break down of the loan

Purchase price                    $40,000

Estimated Prepaid Items     $1,717.35

Estimated Closing Cost       $2,478

Discount                               $560

total                                      $44,755.35

Seller pays 3%closing        $1,200

Loan amount                       $32,000

Cash To Bring at Close         $11,555.35

I got quoted 5.375% for the loan rate, then i agreed to pay $560 to drop it down to 5%

Is this normal for the rate to be this high? I was looking at rate online and it says 3.8% but being an investment I expected it to be higher but not over 5%? Is this normal or is the bank trying to get more out of me?

I credit is, 749, 733, 758

Debts 

$546 mortgage fixed 30 years

school loan $171 fixed as well

Income $2800 monthly 

If more info is needed, i am more than willing to provide. Is this normal for this type of deal? Is the $11,555.35 too much to bring to the closing?

Sorry its my first deal and I am kinda nerves. 

[Joel Owens]

Banks on small loans like this usually charge higher rates and with only 20% down the interest rate is higher.

Not a lot of lenders will even do a loan below 50k. If you were putting 25 or 30% down the rate would likely drop some but the benefit of a few shaved basis point versus 5 to 10% more down doesn't seem worth it.

Better might be to keep that money for reserves for unexpected future costs with the property.