40 year DSCR cash out loans?

Question

Has anyone closed these new 40 year DSCR cash out loans I see advertised as fixed rate options?

Jason Wray · Answer

The DSCR 40 year is really set up to help the rents be equal to or greater than the PITI payment in order to ratio at 1.00% or greater.  Just want to be careful on which broker/lender you use because some of them have a prepayment requirement and try to stick you with a 3-5 year prepay.

There is also a 40 year I/O interest only but its only fixed for the first (10) years.

Make sure you know how many months reserves they require before you get to deep into paying for the appraisal and then find out the deal is cancelled in underwriting.  I get a lot of calls after an unexperienced  loan officer drops the ball and a customer finds out their loan dies due to lack of communication up front on the application.

Ask questions up front and keep in mind lower loan amounts get horrible rates on DSCR loans.  Try and keep the loan amount above $125K.

Katie Smith · Answer

Hi Henry!

Yes! 40 year terms generally have a slightly higher interest rate, but the 1st 10 years of the loan are IO (Interest Only) so the monthly payment will be lower. Do you have something in mind that would be good as a 40 year? Is there a reason you want to do a 40 year? I am always happy to send you a few different options on anything you have!