Why are investment property rates higher on conventional?
Because Fannie/Freddie LLPAs add a material rate or points adjustment for non-owner-occupied properties. Combined with credit and LTV LLPAs, investment-property pricing can be 0.75-1.5%+ higher than the same borrower's primary-residence rate. The agencies price for the higher default risk on investments.
What this actually means.
Investment LLPAs reflect statistical default-risk differences between owner-occupied and non-owner-occupied loans. The LLPA is a fixed adjustment per the matrix and is layered on top of credit-score and LTV adjustments. The result: a 740-credit, 75% LTV primary-residence rate might be 6.5%; the same borrower's investment-property rate at the same LTV/credit might be 7.5-8%. Subject to current Fannie/Freddie LLPAs.
Where this can move.
Down payment, reserves, rental income calculation, multi-financed-property reserve rules, and investment LLPAs all stack to drive pricing.
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More conventional questions on Investment Property.
Educational only. Conventional loan guidelines, lender overlays, rates, fees, PMI, LLPAs, and underwriting requirements can change. Final eligibility depends on full underwriting review. Mortgage Expert, Inc. is not affiliated with Fannie Mae, Freddie Mac, FHFA, or any government agency.