Experience with DSCR loans

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Devin PetersonBusiness Member
Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 664 votes
9mo
Quote from @Will Stewart:

I was curious if any investors have experience with DSCR loans and what their opinions of them are.

Hey Will,

tons of options, and tons of experience - what exactly are you looking for? For the most part DSCR loans solve 99.99% of the problems traditional financing proposes. There is no income, tax returns, w2s, etc. involved. Simply stated, as long as the property can generate enough income to cover your monthly PITI (mortgage payment) any lender should offer and extend your terms. It is a simple 1:1 ratio. You can get really creative with different structures as well (am schedule, PPP, I/O, buydown, etc,) very creative and fun loan product for investors! Happy to connect - good luck!
[email protected]860-538-3672
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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 664 votes
    9mo
    Quote from @Will Stewart:

    I was curious if any investors have experience with DSCR loans and what their opinions of them are.

    Hey Will,

    tons of options, and tons of experience - what exactly are you looking for? For the most part DSCR loans solve 99.99% of the problems traditional financing proposes. There is no income, tax returns, w2s, etc. involved. Simply stated, as long as the property can generate enough income to cover your monthly PITI (mortgage payment) any lender should offer and extend your terms. It is a simple 1:1 ratio. You can get really creative with different structures as well (am schedule, PPP, I/O, buydown, etc,) very creative and fun loan product for investors! Happy to connect - good luck!
    [email protected]860-538-3672
    ProAlpha Capital56 Reviews
    WebsiteView Page
    1Reply
  • AJ ExnerPro Member
    Lender · Springfield, MO · Member since 2023 · 652 posts · 314 votes
    9mo

    Hey Will,

    They are competitive enough that conventional banks are starting to 'try' to do them, rather unsuccessfully in many cases.

    Honestly, especially when it comes to investments, they seem to be superior for the seasoned folks. The rates have even become competitive with many markets actually having DSCR rates beating out conventional.

    I deal with them and utilize both conventional and DSCR quite a bit and I find the processing to be much easier and simpler. Plus, by not needing W2/Tax Returns, your likelihood of denial is much lower and they are more willing to make exceptions.

    Happy to connect and talk more, but depending on how much you want to invest there are a lot of great DSCR options out there.

    Good luck!

    [email protected]417-427-2612
    0Reply
  • Mike Whitman
    Member since 2019 · 41 posts · 22 votes
    9mo

    I'm going through my first close on an investment property using DSCR. So far my process has been pretty smooth. Keep in mind they will likely still run a personal credit check.

    Feel free to message me if you have any questions, I'd be happy to share my experience as a first time investor and first time DSCR loan applicant.

    1Reply
  • Arn CenedellaPro Member
    Rental Property Investor · Greenville, SC · Member since 2008 · 786 posts · 1k+ votes
    9mo

    @Will Stewart

    Once you get to a 5 unit or more property, all loans are effectively DSCR.

    On 1 to 4 unit properties, in generally conventional 30 year loans will be superior in terms of rate and term. 

    The issue becomes as one owns more rentals it becomes increasingly difficult to qualify for another loan. I believe Fannie and Freddie have a limit of 10 loans. 

    In addition the way most lenders underwrite conventional rental loans is problematic. 

    High level…….

    Most will take 75% of the rent and add that to your income. 

    PITI will then be added to your expense column.

    As lenders generally want a one’s debt to be 30% 35% of your income, a break even property actually reduces one’s debt to income ratio as described above. 

    So it all depends. 

    Nothing inherently wrong with DSCR loans.

    [email protected]650-575-6114
    1Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    7mo
    Quote from @Will Stewart:

    I was curious if any investors have experience with DSCR loans and what their opinions of them are.


     They are great if you are tapped out of your traditional Fannie Mae/Freddie Mac Loans. It is also an easier time to qualify if you are self-employed/full-time investor. 

    The main drawbacks are the fees/rate & the prepayment penalty. 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
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    0Reply
  • Dylan ThomasBusiness Member
    Real Estate Agent · AL · Member since 2021 · 90 posts · 44 votes
    7mo

    @Will Stewart Hey Will! I'm in Alabama and am a Realtor, Mortgage Broker, and Insurance Agent. So I have a very unique perspective. And so I always look at the situation as a whole, not the individual pieces. 

    DSCR loans can be a great tool, and many people love their simplicity vs Conventional Investment loans. However, I would recommend not using a DSCR if you can qualify with a Conventional loan. Yes, you can avoid submitting income documentation, as a DSCR is an asset based loan. But, the tradeoffs in rate do not justify going the "easy" route if you don't need it. You generally can only have 10 conventional loans at a time, but for investors you have a need when you get to that point to be able to make further purchases, so the DSCR is a great tool for that. Also, for self-employed investors (who have a harder time qualifying for conventional loans in general), the DSCR is a great option that allows them to continue investing without hitting an income verification roadblock.

    DSCR loans do not automatically come with a prepayment penalty, and you can choose from 0-5 years. However, DSCR rates are much higher without one. If you are choosing to buy and hold long term, then a 5 year PPP will get you pretty close usually to Conventional pricing.

    Essentially, the DSCR is neither good or bad. Just a tool with a specific use.

    [email protected]251-635-2739
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