Getting Heloc or DSCR to purchase a rental property

Los Angeles County, California
Mortgage Brokers & Lenders
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Getting Heloc or DSCR to purchase a rental property

Edwin Wong
Member since 2022 · 10 posts · 2 votes

Hi All,

I am trying to get advice on getting either a Heloc or DSCR loan (welcome other suggestions). I currently have a condo in NY that is fully paid off and I am hoping to get a Heloc or DSCR to get some cash out to get a rental property in either Texas or Arkansas. Looking for advice on the best way to do this .


thanks!

-Edwin 

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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
4y

Are you currently occupying the condo? If so, then you can't do DSCR (non-owner occupied only) and HELOC would probably be your best bet

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  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    4y

    Are you currently occupying the condo? If so, then you can't do DSCR (non-owner occupied only) and HELOC would probably be your best bet

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  • Edwin Wong
    OP
    Member since 2022 · 10 posts · 2 votes
    4y

    Got it, I don’t currently live in the property, I am renting it out to a friend. In this case, what would be a better option ? Thanks !

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  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    4y

    @Edwin Wong- is the condo you primary residence or an investment proeprty ? it makes a difference .....if its your home and you can qualify for it - simpley apply for the heloc with your primary bank or a local bank / credit union ....if its a rental proeprty - you will need to find a lender OK with the rental HELOC ....if you consider a DSCR- compare the rates and fee of this to a heloc option that should have zero fees ......the other factor that comes itno play is how will you need to use the account and how long will you plan to carry the debt

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    4y

    @Edwin Wong Hey! HELOCs are a line of credit on your property, so if you use the funds on a long-term purchase like a rental property, It might not make financially sense. Conventional, A-paper loans, are catching up to the rates of DSCR Loans. These programs are fixed for 30 years which makes a lot more sense for a long-term cash flowing asset.

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  • Matthew CrivelliBusiness Member
    Lender · MA · Member since 2021 · 1k+ posts · 1k+ votes
    4y

    I would start reaching out to lenders. With condos we need to know if the unit is warrantable or non warrantable before the loan can even move forward. To get this question answered you will have to have someone in the condo association fill out a questionnaire provided to you by your lender. Step one is figuring out your options and the best way to do that is to call around!  @Edwin Wong

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  • Edwin Wong
    OP
    Member since 2022 · 10 posts · 2 votes
    4y

    Hi all, thank you for all the inputs ! I am looking to take some cash out of my existing property for the downpayment. Do you guys have a good recommendations on who I can reach out to for both heloc and dscr ? Thanks in advance! 

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  • Charles Renn
    Real Estate Agent · Los Angeles, CA · Member since 2021 · 215 posts · 103 votes
    4y

    Hey @Edwin Wong,

    If you're looking for a lender who can pool rates on finance options, @David Greene has a lending team, The One Brokerage, who work primarily with investor clients.

    Hope this helps!

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  • Andrew Garcia
    Lender · Charlotte, NC · Member since 2022 · 739 posts · 410 votes
    4y

    Hi @Edwin Wong, I recommend you shop with 2-3 different lenders to make sure you are getting the best deal possible. 

    I am going to be honest, my company does not have the best rates for HELOCs but we are very competitve on DSCRs. Credit unions are often great for HELOCs.

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  • Beth JohnsonPro Member
    Lender · Renton, WA · Member since 2018 · 227 posts · 216 votes
    4y

    @Edwin Wong

    Heloc all day, every day. You won't pay if you don't take a draw where a DSCR loan you will pay every month because it's a loan with a monthly mortgage payment. Most DSCR loans have a 5-yr step down prepayment penalties which I don't like personally and the rates have skyrocketed in the last few months making them a poor choice for most situations.

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  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    4y

    @Edwin Wong- if the  property  you want to have the loan placed on is not your  primary residence  and  as its  free and  clear now  - I  would recommend  using a  regular  1st mortgage rental proeprty  cash out  refinance  to  access the  cash  you want/ need

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  • Tim Silvers
    Las Vegas, NV · Member since 2009 · 197 posts · 32 votes
    3y

    Anyone know of a good place to start for DSCR/no doc HELOC for either o/o or non o/o property?

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  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    3y
    DSCR is for non owner occupied properties, generally held in an entity. 
    Most HELOCs I have seen are for owner occupied residences, with some exceptions.  I have a list of these providers in my profile.  Try Figure for a low doc HELOC provider.
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  • Zach Edelman
    Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
    3y

    Edwin - honestly at a high-level it's tough to say if one is better than the other. I'd get quotes on both and see what you're approved for and evaluate from there. I know qualifying for a HELOC is typically more difficult than qualifying for a DSCR loan.

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  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    3y

    I agree with @Zach Edelman that applying for a HELOC is more difficult than applying for a DSCR mortgage. :D

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