DSCR Loans and Alternatives

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DSCR Loans and Alternatives

Tony Mayo
Investor · Fair Haven, NJ · Member since 2017 · 7 posts · 4 votes

I currently have 10 mortgages in my name so I am just learning about a DCSR loans. 

Is this pretty much the only option once we hit that 10 loan cap for conventional loans?

Any other creative ideas that you have seen?

Any banks that you have had good experience with?

Thanks in advance

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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
4y
Quote from @Alex Breshears:

Right now DSCR loan rates are pretty high to have them as a long term debt. What you can do is potentially refinance those 10 properties into 1 portfolio loan through a local bank if they are all in the same state/market. That would be a blanket portfolio loan that would use the properties as collateral, so as long as there is equity and cash flow that might be a easy way to get your 10 conventional loans back in your name.


This is partially inaccurate...refinancing a portfolio does nothing to 'get back' your conventional loans. The conventional loan guidelines are '10 financed properties' and includes any type of financing. So after the refi you still have '10 financed properties' and would not be eligible for conventional loans. I see this idea mentioned on BP a lot and it is 100% wrong.

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  • Kevin Woodard
    Lender · Nationwide · Member since 2021 · 220 posts · 105 votes
    4y

    You could continue to get loans with banks but you will pay a higher price that will be close to what you’d see on the commercial side. 

    DSCR loans are nice in that they aren't reported to the bureaus, can have multiple loans in process to close at or around the same time, and are not looking at your personal financials.

    1Reply
  • Andrew Zamboroski
    Lender · Member since 2021 · 498 posts · 131 votes
    4y

    DSCR option would give you a similar loan to that of conventional (Most allow for a 30-year fixed product). This would be with a slightly higher rate but ease of qualification and without the standard limit of conventional loans. You may also benefit from a blanket portfolio loan across several properties (if it makes sense for your situation).

    0Reply
  • Alex BreshearsBusiness Member
    Lender · Springfield, MO · Member since 2020 · 354 posts · 504 votes
    4y

    Right now DSCR loan rates are pretty high to have them as a long term debt. What you can do is potentially refinance those 10 properties into 1 portfolio loan through a local bank if they are all in the same state/market. That would be a blanket portfolio loan that would use the properties as collateral, so as long as there is equity and cash flow that might be a easy way to get your 10 conventional loans back in your name.

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  • Nathan Grabau
    Realtor · Longmont, CO · Member since 2021 · 577 posts · 631 votes
    4y

    If you get a local bank you can find great DSCR options. I was able to get a DSCR rate .75 points lower than a rate for the conventional investment properties, with 20% instead of 25% down, and lower cash reserves.

    2Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    4y

    DSCR is a great option, I would start using seller financing. This is the right time to do so, while interest rates are skyrocketing and buyer activity has slowed down

    0Reply
  • Jay S.Pro Member
    Lender · San Francisco Bay Area · Member since 2019 · 52 posts · 46 votes
    4y

    Hey Tony. DSCR loans are GREAT options for investors like you who have multiple mortgages or who might have DTI issues.

    We offer DSCR loans with only 15% down payment in all states of America. DM if you are interested and I can send details and guidelines.

    Thank you. 

    [email protected]408-832-8200
    2Reply
  • Daniel Meneses
    Lender · Austin, TX · Member since 2022 · 13 posts · 11 votes
    4y

    If you don't want to change anything with your current mortgages then DSCR would be the way to go.

    Even with rates being high you could still get a good cash flowing property and refinance down the line when rates cool. If you want any help with estimating cash flow on a property feel free to reach out to me and I can help see whether something is worth the squeeze. 

    1Reply
  • Brandon BeardtPro Member
    Lender · La Crescenta, CA · Member since 2021 · 261 posts · 157 votes
    4y
    Quote from @Tony Mayo:

    I currently have 10 mortgages in my name so I am just learning about a DCSR loans. 

    Is this pretty much the only option once we hit that 10 loan cap for conventional loans?

    Any other creative ideas that you have seen?

    Any banks that you have had good experience with?

    Thanks in advance


     Hi Tony,

    Since you've hit the conventional mortgage loan cap, NonQM financing may be your next best bet. This type of financing includes programs such as DSCR or bank statement programs. As of late, DSCR has been extremely popular with RE investors as the qualification is much easier (no need to see any sort of income verification docs). Basically, if the Rents are greater than the PITI, you qualify. We work with quite a few different NonQM lenders and are very well versed in what they require/are willing to lend on. Hope this helps in someway! If you have any questions, don't hesitate to reach out.

    [email protected]818-726-2418
    0Reply
  • Nick BelskyBusiness Member
    Lender · Orlando, FL · Member since 2021 · 1k+ posts · 704 votes
    4y

    @Tony Mayo

    A few things here to call out. DSCR is a wonderful loan option for many. Many investors I work with prefer them over Conventional simply due to ease of use and speed. The costs are similar and they require way less paperwork to qualify and at closing. These are non-TRID loans, which means you don't have to deal with all the annoying disclosures and crap that are required with Fannie/Freddie and agency loans.

    However, it is not a true statement that DSCR does NOT report to credit bureaus as many do. Whichever lender/broker you choose, be sure to ask this question. If they don't know, then get a different one. What I have found is many private lenders who do DSCR will not report, whereas wholesale lenders MAY report, regardless if you close in an entity or as an individual. You are still the guarantor.

    Another thing to note is exposure.  Some lenders will limit exposure when moving into this territory.  They may limit you to x amount of loan amount or x amount of loans.  Many do no have such limits, but it is another thing to be aware of based on how quickly you are planning to scale.  MPO is not to put all your eggs in one basket and spread your loans out so you don't have too much exposure at any one place.

    Pre-Payment Penalties are another point, although, not important to many.  If you plan to hold long term and not refi or sell, then the PPP doesn't normally impact the decision about the loan.  If you are looking to cash out or sell in say under 5 years, then the PPP is a major factor.  In this market, many investors are using more caution as rates are higher and we don't really know when/if they will come down.  You don't want to opt for a 7 year PPP then have rates plummet in 3 years.  You may get stuck with a 5% penalty at exit based from the original loan amount.  If you have a larger loan, that can be quite a bit of cash you just lost.  You also don't want to miss the wave if rates do drop.  On the other hand, if rate continue to climb and you change your strategy to hold, then it wouldn't have mattered.  All things are a gamble... 

    As with conventional, many DSCR lenders will also offer ARM and Interest Only options. These are more tactical strategies based on your needs, goals, and the amount of risk you are willing to assume. In general, ARM loans will have lower rates and I/O options will take on a higher rate, compared to the flat fixed 30 year term loan.

    Be sure to explore your options thoroughly and work with a broker/lender who knows how to help you with your short and long term goals.

    Cheers!

    [email protected]
    Belsky Mortgage, LLC522 Reviews
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    1Reply
  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    4y
    Quote from @Alex Breshears:

    Right now DSCR loan rates are pretty high to have them as a long term debt. What you can do is potentially refinance those 10 properties into 1 portfolio loan through a local bank if they are all in the same state/market. That would be a blanket portfolio loan that would use the properties as collateral, so as long as there is equity and cash flow that might be a easy way to get your 10 conventional loans back in your name.


    This is partially inaccurate...refinancing a portfolio does nothing to 'get back' your conventional loans. The conventional loan guidelines are '10 financed properties' and includes any type of financing. So after the refi you still have '10 financed properties' and would not be eligible for conventional loans. I see this idea mentioned on BP a lot and it is 100% wrong.

    2Reply
  • Upen PatelPro Member
    Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
    4y

    @Tony Mayo As someone mentioned, you can do a cash-out refi of your current portfolio into a bundled/cross collateralized loan. This would free up the conventional slots for you to buy more. These loans are generally ARM, so you will loose the 30 yr fixed.

    [email protected]571-200-6180
    0Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    4y

    I have a guy here in Texas that’s Badass. Can put you in touch with him if you’d like 

    0Reply
  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    4y
    Quote from @Upen Patel:

    @Tony Mayo As someone mentioned, you can do a cash-out refi of your current portfolio into a bundled/cross collateralized loan. This would free up the conventional slots for you to buy more. These loans are generally ARM, so you will loose the 30 yr fixed.

    I do have a bank portfolio loan that will allow you to go beyond the 10. Min 15% down (FICO 720+), 1-4 unit, ALL 50 states. Rate in the 5's. Reach out if you like to learn more.

    As I've mentioned the refinance to 'free up' conventional loans idea is WRONG. The conventional loan guidelines are '10 financed properties' and includes any type of financing. So after the refi you still have '10 financed properties' and would not be eligible for conventional loans.

    Lenders/Brokers need to stop saying this here on BP as it further's this idea in the general population when it's just not correct. 

    0Reply
  • Zach Edelman
    Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
    4y

    DSCR is for sure the move. These days, the rates are pretty similar to conventional and the processing is so much more simplistic and stressless than a conventional loan. Also, DSCR lenders typically don't report the loan to credit agencies, allowing your DTI to remain the same, and thus allowing for you to continue to scale after the loan.

    1Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1w

    Hey Tony,

    You should be able to finance your next purchases with a DSCR loan without hitting any caps. Happy to connect!

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    0Reply
  • Alex S.
    Investor · Washington, US · Member since 2021 · 122 posts · 36 votes
    1w

    Portfolio loans from local credit unions and small banks are the other common route past the 10-loan cap, and they often keep the loan on their books with more flexible terms than DSCR. Worth calling a few community banks in your market before defaulting to DSCR pricing.

    0Reply
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