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April 28, 2006
mortgage rates on 3 families
Are there special conditions on obtaining mortgages on COO 3 family homes, even if it will be used as a 1 family, and is it normal to charge higher rates on that sort of mortgage? Is anyone aware of lenders who are flexible on that and willing to treat the mortage the same as for a 1-2 family? Are there strategies to get around the COO issue (other than not borrowing)?
Comments
Several years ago, I purchased a 5-family home which would normally require a commercial loan. I planned to convert it to an owner-occupied 4-family, so the lender agreed to give the lower residential rate, with a written agreement that I convert the property within a year. They held a small amount of money in escrow which I received back once the CofO was amended. If indeed the mortgage rate on a 3-family is higher than a 1-family, perhaps you could negotiate for a similar type of agreement. But this assumes that you are going to alter the house per code and file for the new CofO.
Posted by: Anonymous at April 28, 2006 10:41 AM
Any loan over $512k is considered a jumbo loan and comes with a higher interest rate. I don't think banks care whether it's a 1 or 3-family as long as you have the credit/income to buy the property. (The fact that our place was a 2-family instead of one actually helped us because we don't have the income to cover the mortgage on our own.)
Posted by: carrie at April 28, 2006 10:50 AM
If I recall correctly from our mortgage for a 4-family (which we use as 3) the mortgage tax on the house was higher than for a 1-family, so it was a bit more expensive to buy. I'm pretty sure that we were still able to get the lowest jumbo mortgage available as an owner-occupied building.
Posted by: Anonymous at April 28, 2006 11:15 AM
it may be possible to get a better rate because it is a 3-fam if it can fit into the conforming loan rates. The limit for a conforming loan is higher on a 3-fam than a 1-fam so it's possible that you would require a jumbo loan (high rate) if it is a one fam but could get a conforming loan if it is classified as a 3.
Aside from that I don't think there will be any difference in your rate as it's still considered owner occupied residential (1-4 fam)
Posted by: Anonymous at April 28, 2006 1:02 PM
Anonymous 1:02 has a good point. I was the 11:15am poster and now that I think of it, when we refinanced we actually could get the conforming mortgage instead of the jumbo because the amount for conforming mortgage on a 4-family was something like $627,000. Although at that point, when interest rates were extremely low, there wasn't much difference (if any) between the jumbo and conforming mortgage rates.
Posted by: Anonymous at April 28, 2006 10:34 PM
Great - more contradictory/misinformation!
Posted by: Anonymous at April 29, 2006 12:08 PM
if you speak to most large banks, there is a slightly higher rate for 3 family than 1 or 2. and some banks don't lend on as high an ltv % (loan to house value ratio) as 1 or 2. if you can go full docs it would be easier and lower rates. that is not to say you can't find a bank that will treat it the say as a 1 or 2. jumbo loan is a different matter and there are ways to get around that and pmi.
i bought a 3 family and self-employed that can't go full docs so i definitely paid a higher rate than if i bought a condo or is an employee.
Posted by: plant lady at May 1, 2006 1:44 PM
The "A" banks do charge more for 3 families.
The "sub prime banks do not, so u would get a better rate w/sub prime banks.
Feel free to call , email to further discuss, I am a branch mgr.of a Mortgage Company. 516 857 4733 cell.
Posted by: steven haber at May 2, 2006 2:32 PM
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