DSCR Loan first time
New to Real Estate · Pittsburgh · Member since 2023 · 5 posts · 1 vote
DSCR Loan first time
Most Popular Reply
Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votesQuote from @Ruben Ramirez:
Hi guys,
I´m new in RE, learning every day. But I wondering how difficult is it to get a DSCR loan without experience building or buying rental properties.
1. With the financial project and viability of the investment, besides a team on board, is enough?
2. I mean which are the usually requeriments to show to lenders?
3. Is too hard to find a lender to finance the project in this market context?
I will appreciate your help,
1. With the financial project and viability of the investment, besides a team on board, is enough?
Yes - its based primarily on the property + borrower (credit and liquidity, experience is a plus, but 1st timers are generally ok with some DSCR Lenders, sometimes with a bit of a leverage limit)
Check out this article - https://www.biggerpockets.com/blog/dscr-loans-what-are-they
2. I mean which are the usually requirements to show to lenders?
Check out this article - covers your exact question comprehensively!
..
3. Is too hard to find a lender to finance the project in this market context?
Nope - check out BP's featured DSCR Lenders here https://www.biggerpockets.com/loans
you have come to the right place, BP is a great source for DSCR lenders operating today!
Harpoon Capital512 Reviews
15 Replies
- 3yDevin PetersonBusiness MemberLender · Sarasota, FL · Member since 2022 · 2k+ posts · 664 votes
Ruben,
First time DSCR users have the same leverage as those who've used the loan type before. You should be able to find a reputable investment focused broker to provide 20% down for your purchase.
ProAlpha Capital56 Reviews - 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Ruben Ramirez:
Hi guys,
I´m new in RE, learning every day. But I wondering how difficult is it to get a DSCR loan without experience building or buying rental properties.
1. With the financial project and viability of the investment, besides a team on board, is enough?
2. I mean which are the usually requeriments to show to lenders?
3. Is too hard to find a lender to finance the project in this market context?
I will appreciate your help,
1. With the financial project and viability of the investment, besides a team on board, is enough?
Yes - its based primarily on the property + borrower (credit and liquidity, experience is a plus, but 1st timers are generally ok with some DSCR Lenders, sometimes with a bit of a leverage limit)
Check out this article - https://www.biggerpockets.com/blog/dscr-loans-what-are-they
2. I mean which are the usually requirements to show to lenders?
Check out this article - covers your exact question comprehensively!..
3. Is too hard to find a lender to finance the project in this market context?
Nope - check out BP's featured DSCR Lenders here https://www.biggerpockets.com/loansyou have come to the right place, BP is a great source for DSCR lenders operating today!
Harpoon Capital512 Reviews - 3yStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 494 votes
@Ruben Ramirez, You can get a DSCR loan without having gotten one before. There are lenders that will work with first time investors. Some will want you to have owned a property. Others will work with renters who are looking to buy their first property as an investment property.
Regarding your questions, there are investors making money in this market. I work with some of them. Requirements for a DSCR loan is a down payment and a credit score. More on that below. Regarding your question, DSCR lenders are funding millions of loans a month right now- it's not hard at all to find a DSCR lender.
There are lenders that will go down to 620 for your middle mortgage FICO credit score with more money down and lenders who will do 15% down for a single family with 720 and above with a 1.2 DSCR ratio (more on that below). For a 1 one ratio, they will do 20% down.
DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth. They don't consider borrower income.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. Market rents from the appraisal and/or the actual rents need to cover the mortgage payment, property insurance, taxes and HOA (if applicable).
4. Prepayment penalties range from 1-5 years and you get to decide the length of the term. The longer the term, the less of an impact on the rate.I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350 Insurance = $100 Association Dues = $50
Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100 Association Dues = $25
Total PITIA = $1875
Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23
DSCR loans can be used for purchases and for cash out refinances. Most lenders allow you to vest individually or as an LLC.
Bright Skyline518 Reviews - Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
DSCR is one of the easiest loans to get approved for. Your credit has to be decent and the property you are buying has to cash flow.
- New to Real Estate · Pittsburgh · Member since 2023 · 5 posts · 1 vote3yThanks a lot! for take time and answer my question
Quote from @Devin Peterson:
Ruben,
First time DSCR users have the same leverage as those who've used the loan type before. You should be able to find a reputable investment focused broker to provide 20% down for your purchase.
- New to Real Estate · Pittsburgh · Member since 2023 · 5 posts · 1 vote3yThanks a lot! for take time and answer my question
Quote from @Robin Simon:
Quote from @Ruben Ramirez:
Hi guys,
I´m new in RE, learning every day. But I wondering how difficult is it to get a DSCR loan without experience building or buying rental properties.
1. With the financial project and viability of the investment, besides a team on board, is enough?
2. I mean which are the usually requeriments to show to lenders?
3. Is too hard to find a lender to finance the project in this market context?
I will appreciate your help,
1. With the financial project and viability of the investment, besides a team on board, is enough?
Yes - its based primarily on the property + borrower (credit and liquidity, experience is a plus, but 1st timers are generally ok with some DSCR Lenders, sometimes with a bit of a leverage limit)
Check out this article - https://www.biggerpockets.com/blog/dscr-loans-what-are-they
2. I mean which are the usually requirements to show to lenders?
Check out this article - covers your exact question comprehensively!..
3. Is too hard to find a lender to finance the project in this market context?
Nope - check out BP's featured DSCR Lenders here https://www.biggerpockets.com/loansyou have come to the right place, BP is a great source for DSCR lenders operating today!
- New to Real Estate · Pittsburgh · Member since 2023 · 5 posts · 1 vote3y
Quote from @Stacy Raskin:
@Ruben Ramirez, You can get a DSCR loan without having gotten one before. There are lenders that will work with first time investors. Some will want you to have owned a property. Others will work with renters who are looking to buy their first property as an investment property.
Regarding your questions, there are investors making money in this market. I work with some of them. Requirements for a DSCR loan is a down payment and a credit score. More on that below. Regarding your question, DSCR lenders are funding millions of loans a month right now- it's not hard at all to find a DSCR lender.
There are lenders that will go down to 620 for your middle mortgage FICO credit score with more money down and lenders who will do 15% down for a single family with 720 and above with a 1.2 DSCR ratio (more on that below). For a 1 one ratio, they will do 20% down.
DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth. They don't consider borrower income.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. Market rents from the appraisal and/or the actual rents need to cover the mortgage payment, property insurance, taxes and HOA (if applicable).
4. Prepayment penalties range from 1-5 years and you get to decide the length of the term. The longer the term, the less of an impact on the rate.I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350 Insurance = $100 Association Dues = $50
Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100 Association Dues = $25
Total PITIA = $1875
Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23
DSCR loans can be used for purchases and for cash out refinances. Most lenders allow you to vest individually or as an LLC.
Thanks a lot! for take time and answer my question
- 3yStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 494 votes
Quote from @Ruben Ramirez:
Quote from @Stacy Raskin:
@Ruben Ramirez, You can get a DSCR loan without having gotten one before. There are lenders that will work with first time investors. Some will want you to have owned a property. Others will work with renters who are looking to buy their first property as an investment property.
Regarding your questions, there are investors making money in this market. I work with some of them. Requirements for a DSCR loan is a down payment and a credit score. More on that below. Regarding your question, DSCR lenders are funding millions of loans a month right now- it's not hard at all to find a DSCR lender.
There are lenders that will go down to 620 for your middle mortgage FICO credit score with more money down and lenders who will do 15% down for a single family with 720 and above with a 1.2 DSCR ratio (more on that below). For a 1 one ratio, they will do 20% down.
DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth. They don't consider borrower income.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. Market rents from the appraisal and/or the actual rents need to cover the mortgage payment, property insurance, taxes and HOA (if applicable).
4. Prepayment penalties range from 1-5 years and you get to decide the length of the term. The longer the term, the less of an impact on the rate.I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350 Insurance = $100 Association Dues = $50
Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100 Association Dues = $25
Total PITIA = $1875
Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23
DSCR loans can be used for purchases and for cash out refinances. Most lenders allow you to vest individually or as an LLC.
Thanks a lot! for take time and answer my question
You're welcome!
Bright Skyline518 Reviews - Lender · Allentown, PA · Member since 2023 · 207 posts · 38 votes3y
Hey @Ruben Ramirez,
Lenders are looking for a few things. They want to see decent credit and proof of assets. I have done plenty of DSCR deals with clients with no landlord experience. They will hit you on the interest rate and LTV. You're generally looking at 20-25% down on the purchase. I am doing DSCR deals on the regular so yes it is still possible in today's market.
- 3yMichael PorchePro MemberRental Property Investor · Boise, ID · Member since 2017 · 220 posts · 101 votes
Hey @Ruben Ramirez!
Getting a DSCR loan is actually pretty easy. However, those are just 1 of many different asset-based loans out there. It's good to talk to a lot of lenders out there before settling.
- 1. What is your question here?
- 2. It depends on what loan type and on the lender. But be prepared to show everything. However, if you talk to enough lenders, you'll realize that different lenders have different qualifications
- 3. I'm not sure what this means either... but the quick answer is no. I have found a lender for any situation. You just need to actually call people and ask for referrals nonstop
- Investor · Hillsborough County · Member since 2024 · 30 posts · 15 votes2y
Quote from @Brayden Hrycko:
Hey @Ruben Ramirez,
Lenders are looking for a few things. They want to see decent credit and proof of assets. I have done plenty of DSCR deals with clients with no landlord experience. They will hit you on the interest rate and LTV. You're generally looking at 20-25% down on the purchase. I am doing DSCR deals on the regular so yes it is still possible in today's market.
Hello Brayden,
This may be a dumb question so forgive me for asking; I feel a little embarrassed to be honest. But whatever, you got to put yourself out there and not be afraid to ask questions and admit your limitations. I'm new to real estate(just started renting out my rental property last fall). I understand real estate to be capital intensive. However, I'm looking at creative ways to produce cash flow with little to no cash down. The question is:
I have >$100,000 of equity in my (1st SFH) rental property. I currently live in my primary residence (2nd SFH). Will a DSCR lender give me a home equity loan from my (1st SFH) rental property, so that I can cover the down payment + closing costs to assume the 2.75% interest rate on a (3rd SFH) property I would move into immediately? As I would have to move in at least for a year to assume that rate. I would then just rent out my current (2nd SFH). The goal would be to capture that interest rate and keep it for the next 25 years so that I can cash flow well, if I move again and rent it out. - Lender · Allentown, PA · Member since 2023 · 207 posts · 38 votes2y
Quote from @Ismael Ayala Jr.:
Quote from @Brayden Hrycko:
Hey @Ruben Ramirez,
Lenders are looking for a few things. They want to see decent credit and proof of assets. I have done plenty of DSCR deals with clients with no landlord experience. They will hit you on the interest rate and LTV. You're generally looking at 20-25% down on the purchase. I am doing DSCR deals on the regular so yes it is still possible in today's market.
Hello Brayden,
This may be a dumb question so forgive me for asking; I feel a little embarrassed to be honest. But whatever, you got to put yourself out there and not be afraid to ask questions and admit your limitations. I'm new to real estate(just started renting out my rental property last fall). I understand real estate to be capital intensive. However, I'm looking at creative ways to produce cash flow with little to no cash down. The question is:
I have >$100,000 of equity in my (1st SFH) rental property. I currently live in my primary residence (2nd SFH). Will a DSCR lender give me a home equity loan from my (1st SFH) rental property, so that I can cover the down payment + closing costs to assume the 2.75% interest rate on a (3rd SFH) property I would move into immediately? As I would have to move in at least for a year to assume that rate. I would then just rent out my current (2nd SFH). The goal would be to capture that interest rate and keep it for the next 25 years so that I can cash flow well, if I move again and rent it out.Hello @Ismael Ayala Jr.,
There are lenders that will offer home equity loans as well as cash out refinances (run the numbers to see what makes more sense).
However, home equity loans will work off your debt to income ratio while DSCR cash out refinances won't look at your income. They will only look at how the property is performing.
Going back to your question- Yes, you can pull equity out of your investment property so you can re-invest into other assets. This will be based on their own parameters of how much they can loan compared to the value of your property. Just because you have $100k in equity doesn't mean they will lend you $100k. For example, cash out refinances you're typically looking at a max of 75-80% of the properties value.
I would be happy to discuss more with you!
- Member since 2026 · 3 posts · 3 votes4mo
Hey Everyone,
Thank you for these learning points
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