The simplest answer is the one the other Walkers gave you: 1 " point"
( that point is a one time prepaid interest charge of 1% of the loan amount paid at the close of the purchase)
1 point would be the added on charge for a purchase of a single family house (SFR) in good condition (not a fixer) with 25% or more down.
If the buyer chooses a higher note rate in lieu of paying the one time point the note rate will be about 1/2% higher than an owner occupied home.
As a â€œrule of thumbâ€ you can avoid the higher note rates add-ons that I estimate for you in the following table by paying "points" For example if you pay two to two and a half points you may be able to avoid a 1% increase in the note rate.
This is for example purpose only to answer the Trulia consumer (Jason) question and not a solicitation for a loan application:
Non-owner occupied typical add on rates - this is not an offer to lend.
SFR with 25% or more down + add Â½ % to rate.
SFR with 20% down + add 3/4% to the rate
Duplex with 25% down add 7/8% to the rate
Duplex with 20% down add 1.25% to the rate.
Triplex or Fourplex, 30% down,
add 1.375% to the rate
Triplex or Fourplex 20% down add 2% to the rate.
This chart is a gross simplification. The typical mortgage lender rate sheet is 7 to 8 pages long, with dozens of programs per lender. There are hundreds of lenders, All with their own pricing matrices and nuances.
When it comes to investment lending the higher the perceived risk there is the higher the points and / or rates will be.
Some of the keys to obtaining investment rates closer to owner occupied rates are:
1. Full documentation of borrower and property income.
2. Substantial down payment from verified source.
3. Excellent Credit.
Some factors that will worsen your rate considerably:
Failure to properly document property income and expense.
Failure to document borrower personal income.
Failure to provide adequate down payment and verification of down payment funds.
Poor property condition.
Number of rental units greater than 5 but less than 30.
Multi-million dollar investment properties are totally different. Interest Rates on class â€œAâ€™ office buildings, thriving retail centers and large residential complexes (100+ units) can be very low.