Investment Property Mortgage Rate

https://www.efanniemae.com/sf/refmaterials/llpa/pdf/llpamatrix.pdf

300 Mercer: The same rates apply, however there is a 1.75% fee (based on the loan amount) for investment properties that is due at closing. In lieu of paying this fee at closing you can choose to work this fee into the rate which would correspond to approximately 5.00%. Feel free to email me at nycmortgage@gmail.com if you have any other questions.

They call the 1.75% an adverse market delivery charge. It's all in the matrix

Thanks a lot. This is very helpful.

NYmortgage, do you know what the adverse market delivery charges were in the past - say in 2007? Thanks.

I am refinancing an investment property in illinois for 4.75% 25% equity(30yr fixed) no pts, mtg broker picking up fees

300 Mercer: There never used to be adverse delivery charges. They were implemented for the first time in 2008 by Fannie Mae and Freddie followed soon after.

Kiz: The 0.25% difference in rates is related to the differences in Fannie Mae's conforming limits. In Chicago the Fannie Mae loan limit is the traditional $417K, but in NY it's up to $729K. Fannie loans falling in between $417k and $729k would incur a slightly higher rate of approximately 0.25%.

So you are saying NYmortgage that prior to 2008 the GSE's exercised no risk based pricing? If that's the case what was stopping Wall Street from selling the worst barely passing loans to Fannie & Freddie and keeping the best for themselves or selling those privately.

NYmortgage i am not paying the 1.75% fee as you mentioned. loan balance is low ( around 250k), i was told i am paying .25% higher bec it is an investment property

Riversider: Correct. If the firms were Fannie Mae sponsors there would have been nothing prohibiting them from doing so. However depending on their agreements with Fannie and Freddie if the loans defaulted say within the first 6 months they would likely have been forced to buy the loans back from them.

Kiz: As I mentioned above, you could either pay the 1.75% fee upfront and get the prevailing rate or pay nothing upfront and incorporate the risk fee into your rate, as you have chosen to do. Instead of choosing 4.50% with 1.75% inv prop points, you chose 4.75% with no points, and if you lived in NY and chose a loan amount greater than $417k, you would be at roughly 5.00% without the investment property points.

I can only imagine the abuses. Not all loans are put back due to reps and warranties and certainly not all defaults happen within the first six months.

I thought they'll only do 70% financing these days on investment properties.

Riversider: indeed.

alanhart: You may be thinking of the new interest only guidelines which are 70% for Agency loans. 75% financing is allowed on investment refinances and 80% on purchases. And for loans between 417k and 729k the maximum is 65%.

If you try and get that investment property under a LLC, the rate is astronomical and that is only if you can find a lender willing to make a loan under those circumstances. I tried for over a year and then gave up. The LLC protect my other assets from lawsuits connected to the investment property.

NYmortgage
thanks for all the interesting info

This is exactly why I am dis-inclined to seeing government assuming business roles. No hedge fund or partner in a fund risking his own capital would have knowingly allowed that to happen. The incentives are all wrong.

Curious what stops someone who does not have an existing mortgage to declare an investment property as primary residence and get a lower mortgage rate? After all, people do not have to move into their "new primary residence" immediately. I realize that technically this is "mortgage fraud" but what is a. the possibility of getting caught b. penalty, if you are making your payments.

Fraud for one. Forgetting for a moment the possibility or the repercussions of getting caught it is a mis-representation. If push comes to shove the lender would have options for recourse. I looked into this several years ago. I don't recall the details, but it is not an option unless you want to roll the dice.

wha? whahhhhhhaaaaaa? Ppl declaring an "investment" as a primary to qualify for a lower ir gov't sponsored mortgage? WTF? Next you'll tell me ppl stop paying mortgages for 6 months to get said bankers to lower their rates! Dogs will become cats best friends, Sharks will befriend Clown Fish! brokers will apologize for selling the bubble, Rangel will apologize... CHAOS!

Gambling! I'm shocked, shocked to see gambling here!

300 mercer, it is fraud. There is little chance though that the mortgage company would pick this up. As long as you are making your payments on time, no one would even look. If you do get caught they "might" call in the loan.