Can DSCR loans be given with lower than a 20% down?

Question

Hi everyone, first time home buyer, I’m purchasing in Baltimore, MD and am looking to see if anyone can offer or knows of anyone who offers DSCR loans with possibly a lower rate than 20% down

Thank you!

Timothy Howdeshell · Answer

Hi Natasha,

Welcome to the forums and congrats on getting started!

I looked up median home price in Baltimore and came back at $200k. Therefore a 5% difference is only $10k. I realized that this may be a lot of money, but in real estate investing $10k can go pretty fast.

As this is your first property, out of state, I don't recommend trying to "game" the lending products. Use what is commonly available and accessible (80% LTV loans, no cash-out 30 yr fixed product). You don't need to use a DSCR loan unless you're buying properties that don't conform to standard guidelines or are trying to do cash-out refinances prior to the 12-months seasoning.

It will be safer, and you'll sleep better, if you can: get the additional $10k from working, get a 5% discount on a house, find a property where you can add value through renovations or re-purpose and end up <75% LTV (aka., buy at a discount). Don't put your last $10k into a home as you need reserves and something will go wrong.

It may take more time, but you want to do this right and not hate your life or get wiped out on the first property. Best of luck!

Sam Yin · Answer

@Timothy Howdeshell

Solid advice!

Jason Wray · Answer

Natasha,

The term "First Time Home Buyer" and DSCR do not go together because DSCR is not for primary homes.  If you are looking to buy a primary home you cannot use DSCR instead choose FHA, Conventional or Portfolio (Banks private funds).  If you are buying your 'First investment" home where you will "Not" occupy the home then Yes DSCR.

DSCR is used for when a borrower cannot show income or their DTI is too high in most cases.  If you want to buy a investment property you can put 15% down on single family or even 2-4 units.  Primary you only need 3.50% to 5% unless it’s a Jumbo loan over $1M then 10% would be required.

Logan Singleton · Answer

Hi Natasha,Will you be doing any renovation to the property? If so I may be able to assist with covering the renovation costs and 90% of the purchase price.

Erik Estrada · Answer

Hey Natasha,

Is this your first property ever? Most lenders will cap you at 70-75% LTV. if you are a first time buyer. You will also need to show that you have 12 months of rental payment history to show that you won't move in to the property..

If this is your first investment property and you own a primary, you could expect 75-80% LTV. 85% LTV is possible for experienced investors and properties that debt cover at higher rates.

Since you are a first time buyer, have you looked into house hacking instead? On conventional loans you may use ADU income to qualify for a primary residence with a lower down payment. You may also do an FHA loan on 2-4 units and put 3.5% down, although it may be tough to find multi families with vacant units in the LA area... but still an option

Justin Hammerle · Answer

@Natasha Shamoon - As a first time homebuyer have you considered a FHA loan?  Down payment is 3.5%.

Account Closed · Answer

What are the terms, fees on a 95% LTV loan? I saw this same claim on Investor Underground facebook page yesterday. Seems way out of whack these days......

Sara Frank · Answer

Will this be owner occupied or an investment? I assume investment since your location says CA. Maybe consider a vacation home loan if you dont want to put down 20%. Some are as low as 10%, rates will be high but not as high as DSCR.

Ali Nichols · Answer

@natasha are you looking to invest out of state?

Ed Brancheau · Answer

Yeah, I completely forgot about that. I used an FHA loan as a first time home buyer to house hack my first property, a triplex here in San Diego. God, that was like another lifetime ago.Definitely go that route if you have already, Natasha!

Can DSCR loans be given with lower than a 20% down?

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