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Is there really a different mortgage rate on home to be rented than owner occupied

Got a bridge loan and bought a new house right before the economy fell apart. Now bridge is about due and I still have not sold the house. Am thinking of renting it out. My lender tells me I will have a higher interest loan than otherwise because home will not be owner occupied. Is this true?  Can I still shop around for other lenders in thissituation?
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January 18 2009 - Rockford
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you can and should shop around but it s true!
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January 18 2009

Yes, but the rate will always be higher for an investment.

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January 18 2009
You can refinance it for the lowest rates, while you live there. Renting it out later, would then be an option...  ; )
Call me if you have any questions. You can click on my picture for details
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January 18 2009
its all due to perceived risk, should you hit a money shortfall lenders expect that a primary residence will be paid before an investment property. and as their required rate of return is in included in the rate, the investment property rate will and should be higher    
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January 19 2009


Auria,
Can we get a little spam on the side to go with that advise?

Jonilo,
Lenders price loans based on risk...if your financial situation becomes strained, you're likely to stop making payments on the property you DON'T live in first, so there is a risk to the lender...sort of like getting car insurance when you're 18...more likely to cost the ins co more

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January 19 2009
jonilo, actually, the rate is the same. The difference is in fees. Some brokers include the fees in a higher rate. Others include it in the loan amount or the borrower pays the extra fees at closing. The choice should be yours. ... Good luck!
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January 19 2009

Auria-

Please tell me you are not encouraging the "op" to consider the previous home (which is obviously on the market), has encombered with a bridge loan, to purchase a new home (as a primary), now, to claim this previous home as his primary for "purposes" of refinancing to the lowest rates available. ;-)

It's kinda reading that way and I would seriously hope not to have other consumers reading these post, to think or feel this is condoned behavior with applications for refinancing or purchasing. It is serious and will trigger a repurchase request if discovered in an audit or default review.

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January 19 2009
Yes, unfortunately banks consider non-occupied homes higher risk than the actual homes you live in.  The ideology behind this is that you live in your home, you maintain it and care for it.  However, a rental property or investment will have tenants.  Tenants may or may not maintain the property, and this risk factor is built into the rates offered for investment homes and the requirements to find a loan of such.  Another major reason is that if you end up losing your job or unable to pay the mortgage, you are most likely to continue paying your home you live in rather than the tenants home. 
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January 19 2009
Profile picture for Prisoner 12598751
Hey All, just on my hour out of the cell block and found this cool site on the computer!!

Jonilo, please feel free to contact me or Auria if you have any questions on how to commit mortgage fraud. I was pretty good at it in my days on the outside.

BTW, I'm in the jail for money laundering not mortgage fraud so I am pretty confident that if you follow Auria's advice you wont get caught. But if you do, just remember, start a fight your 1st day is prison and everyone should leave you alone after that.

Good luck!
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January 19 2009
Prisoner,

I did leave the FBI, Mortgage Fraud and Federal offense, out of my post and to the discretion of the reader.

Thanks for clearing that up!
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January 19 2009

You can get a low rate on an investment property, but the fees are a lot more expensive than a primary residence.

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January 19 2009
FNMA&FHLMC control the risk-based pricing of most of the mortgage market.  There are pricing increases for investment properties based on the percentage of the property you intend to borrow. 

This may be a bit difficult to follow, but you can see FNMA's risk-based pricing criteria at:
https://www.efanniemae.com/sf/refmaterials/llpa/pdf/llpamatrix.pdf
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January 19 2009
 
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Is there really a different mortgage rate on home to be rented than owner occupied
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