Refinancing primarily home using DSCR and buy a house for primary with 5-10% d

Huntsville, Alabama
General Real Estate Investing
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Refinancing primarily home using DSCR and buy a house for primary with 5-10% d

Bao Nguyen
Real Estate Agent · Huntsville · Member since 2024 · 1 post · 2 votes

Hi everyone,

I’m looking for some advice from those who have done something similar.

Here’s my situation:

  • I currently own and live in my primary residence.
  • I’m considering refinancing it using a DSCR (Debt Service Coverage Ratio) loan, which would officially turn it into a rental property.
  • After that, I would purchase a new primary residence with 5–10% down (conventional loan or FHA, depending on what fits best).
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JooYung Choi
Realtor · NJ · Member since 2023 · 215 posts · 99 votes
1y

Not a lender, but you shouldn't need to refinance your primary residence to a DSCR to be able to purchase your next home. Lenders will count 75% of monthly rents to your DTI so as long as you can show them a lease / security deposit, you will be able to buy your next primary residence (assuming everything fits in your DTI)

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  • Steve Daddeo
    Investor · CT · Member since 2022 · 36 posts · 18 votes
    1y

    Hi Bao - what’s your current interest rate on your primary residence?

    If it's anywhere in the 2–4% range (like a lot of people locked in during the last few years), you might want to reconsider refinancing. That would be an extremely attractive rate you probably won't be able to replace, and refinancing into a higher rate — even with a DSCR loan — could cost you a lot more long-term.

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Bao Nguyen:

    Hi everyone,

    I’m looking for some advice from those who have done something similar.

    Here’s my situation:

    • I currently own and live in my primary residence.
    • I'm considering refinancing it using a DSCR (Debt Service Coverage Ratio) loan, which would officially turn it into a rental property.
    • After that, I would purchase a new primary residence with 5–10% down (conventional loan or FHA, depending on what fits best).

    you will have issues getting a DSCR with it as your primary and you still living there. you will need to move out before getting a DSCR loan.

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  • Ko KashiwagiPro Member
    Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
    1y

    Hi Bao,

    You will need to have a new place before you close on the DSCR refinance, so you'd need to make sure to line this up in advance. However, I believe you should be able to right off most of your current debt if you are buying with conventional loan by indicating you will be moving out & renting it out. Depends on programs but I believe you can use 75% of market rent as rent and reduce the liability to make your DTI look better.

    310-848-9776
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  • JooYung Choi
    Realtor · NJ · Member since 2023 · 215 posts · 99 votes
    1y

    Not a lender, but you shouldn't need to refinance your primary residence to a DSCR to be able to purchase your next home. Lenders will count 75% of monthly rents to your DTI so as long as you can show them a lease / security deposit, you will be able to buy your next primary residence (assuming everything fits in your DTI)

    1Reply
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