A borrower receives pre-approval for an investment property loan but later decides to make it their primary residence. What is the most significant impact of this change?
Correct Answer
B) The interest rate and loan terms may improve due to lower risk classification
Primary residence loans are considered lower risk than investment property loans, typically resulting in better interest rates, lower down payment requirements, and more favorable loan terms. Investment property loans usually require higher down payments (typically 20-25%) and carry higher interest rates due to increased default risk.
Why This Is the Correct Answer
Primary residence loans are considered lower risk than investment property loans, typically resulting in better interest rates, lower down payment requirements, and more favorable loan terms. Investment property loans usually require higher down payments (typically 20-25%) and carry higher interest rates due to increased default risk.
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