Apartment Loan With the Best Interest Rates:
Do you want the Best Interest Rate on your Apartment Loan? Then read about underwriting secrets in loan pricing from Freddie Mac and Fannie Mae:
Does it matter which Freddie Mac or Fannie Mae lender you go through? Since all of the pricing is the same, correct? Wrong! Pricing is different between licensed Freddie Mac and Fannie Mae originators. Each originator has a specific internal profit margin they are trying achieve. Caffrey & Company LLC has an alliance with over 40 other mortgage brokers throughout the US. This affiliation gives Caffrey & Company LLC clout with lenders to offer the best rates for Apartment Loans, and at the lowest costs. You, the borrower benefit from this alliance. What other aspects go into Freddie Mac and Fannie Mae loan pricing? Here are some of the most common underwriting events that affect pricing:
- The population size of the assigned MSA will impact the pricing. Smaller population centers are priced wider (higher) than the same property located in a larger population center.
- Make sure your mortgage banker checks the subject property rents against the “affordability” index used by Freddie Mac and Fannie Mae. Both of these lenders will apply a rate discount if the average rents for on your subject property fall below a certain economic threshold. If they do you could see a reduction on the street quoted rate between 10 and 15-basis points. This does not mean your property has to come with Low Income Tax Housing Credits, it just means your market rent property is collecting average rents below the mean in your submarket. There are no on-going restrictions on the rents should you wish to increase the rents during the life of your new Freddie Mac or Fannie Mae Apartment loan.
- Is your mortgage broker experienced enough to be able to identify abnormal expense levels? As a standard practice here at Caffrey & Company LLC we study the historical operating expenses. Often a property owner has the option of classifying an expense as an ongoing operating expense or to treat this same expense as a capital item. What difference could this make to the loan you are in the process of obtaining? If the Mortgage Broker can demonstrate to Freddie Mac and/or Fannie Mae certain expenses found in the Operating Expense column could be reclassified as capital expenditures the lender’s Underwritten Cash Flow will go up which in turn will increase the Underwritten Debt Service Coverage Ratio (DSCR). The higher the DSCR the lower the interest rate. Moving the DSCR from 1.25x to 1.50x could result in a further reduction in interest rates by 10 to 15 basis points. As a general rule, the Loan to value follows these same principals. The lower the loan to value, the lower the interest rate will be because the DSCR ratio on a lower leverage loan is generally higher than on a higher leverage loan. Recently we were working on an acquisition. Our client was in the market for an 80% loan to purchase. Because of our unique and professional underwriting we were able to move certain expense items in the historical operating expenses to “below the line,” resulting in a 10 basis point reduction in the interest rate.
- Fannie Mae and Freddie Mac have their own specific closing costs. It is difficult to know which lender has the lowest closing costs before you are engaged. Reduce these closing costs surprises by working with experienced mortgage brokers that can provide accurate estimated closing costs before you are financially committed to Apartment loans.
- Nobody likes paying fees. If your mortgage broker charges a fee of 1.0% how does equate to the interest rate charged on the loan? On a 10-year fixed rate term loan with a 30-year amortization roughly a 15 basis point swing in interest rates is equal to 1.0% in proceeds or on present value basis coverage the mortgage brokers 1.0% fee. One Hundred (100) basis points equal One Percent (1.00%).
We have more underwriting details on many loan products found on our website: www.CaffreyLoans.com. If you have a question feel free to call or email Mike Caffrey direct at (913) 402-7077 email: Mike@CaffreyLoans.com.