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Better Rate if Father Signs?

I was told that with a condo/townhome that banks aren't giving the best rate possible because the risks of these are a lot higher than a house. I have an 800 credit score. I can get a 5/1 ARM right now for 4.5% as of 2 days ago. My lender told me it's higher than what was out there because it's a townhome and not a house (More risk to bank). If my dad signed something would it allow me to get the best rate possible? Thanks in advance for advice.



 
  • July 16 2009 - Algonquin
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Answers (3)

In many cases it will come down to the title and how it reads.  Townhomes frequently are classified as "Single Family Residence" and may not have the same hits that a condo does.  I can only assume that the black box algorithms used in the lending world put Condos as a higher risk.  In the conforming world the hits are universal and I hope you are not in a "Soft Market" (ironic given the whole national picture) because the hits are worse.

In fact adding your father to the loan could actually worsen your rate.  You then have a "non-occupant" co-borrower and there is not a lot of love for that in the conventional world.  You could be faced with an additional hit for "investment". 

I would ask the condo or listing agent if the project is FHA Warrantable.  If the project is approved you may want to consider FHA financing as their tolerance for Dad helping on the loan will be better as with the hits to pricing for condo.  Could be enough to offset the MI and MIP fees associated with FHA even at below 80% LTV
  • July 17 2009
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Rates are the same for all properties. The difference is in fees. Financing a Condo with less than 25% down has a 0.75% Fee. See Table 3 on this LINK. .... Happy funding, Rudi Hofmann
  • July 17 2009
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No, your father co-signing will not improve the rate since they are bumping the rate becasue its a townhome/condo.  Many do not bump the rate because its a townhome/condo, so I would recommend shopping around.
  • July 16 2009
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