DSCR LOANS. Where to get approved?
Member since 2019 · 1 post · 3 votes
DSCR LOANS. Where to get approved?
Most Popular Reply
Mark MunsonBusiness Member
Lender · Orlando, FL · Member since 2022 · 440 posts · 300 votesHi @Nolan Dalton
As others have said, there are plenty of DSCR lenders out there. With a DSCR loan, you should expect up to 80% of the purchase price as the loan amount. As you talk to lenders, make sure you know the following:
1 Rate Lock Policy - If the DSCR lender doesn't rate lock for 45 days, then I'd go elsewhere. Some DSCR lenders will float the rate until the appraisal is back, leaving you open to having the rate changed during the floating period.
2. Ask about Origination Fees - A good, well-capitalized DSCR lender shouldn't be charging more than 2 points, assuming the loan amount isn't too low. If they are telling you 2.5+ in origination fees, you can probably find cheaper money elsewhere.
3. What is the DSCR Requirement - Look for a 1 to 1 ratio, anything higher like 1.2x might force you to put more money down.
If you need more feedback, happy to help. Best of luck!
37 Replies
- Real Estate Agent · NY · Member since 2022 · 111 posts · 48 votes3y
I have found the trick with banks to be that they will all only tell you what's possible at their bank and not what's possible in banking. I would go about this in one of two ways. I'll through a bonus in at the end. Make a list of all the local banks in your area and ask if they provide this product or know of a bank who provides this product. If yes proceed if no, get off the phone they are all going to try and sell you a different product and you don't have time for that. Look up mortgage brokers in your area and do the same thing. I used a DSCR loan on my last property and got it from a broker who referred me to a broker who referred me to a broker. Bonus option your on BP so probably there is a mortgage broker on here who will find you if you keep posting about it.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Traditional banks will not offer this, private investors do. Get with a mortgage broker or @Robin Simon
- 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Nolan Dalton:
" I talked with a manager at my local KeyBank and she told me "There is no such thing as a DSCR loan."
Brutal - banks are zeros and this is so cringe
Send her this article! https://www.biggerpockets.com/...
Harpoon Capital514 Reviews - 3yMark MunsonBusiness MemberLender · Orlando, FL · Member since 2022 · 440 posts · 300 votes
Hi @Nolan Dalton
As others have said, there are plenty of DSCR lenders out there. With a DSCR loan, you should expect up to 80% of the purchase price as the loan amount. As you talk to lenders, make sure you know the following:1 Rate Lock Policy - If the DSCR lender doesn't rate lock for 45 days, then I'd go elsewhere. Some DSCR lenders will float the rate until the appraisal is back, leaving you open to having the rate changed during the floating period.
2. Ask about Origination Fees - A good, well-capitalized DSCR lender shouldn't be charging more than 2 points, assuming the loan amount isn't too low. If they are telling you 2.5+ in origination fees, you can probably find cheaper money elsewhere.
3. What is the DSCR Requirement - Look for a 1 to 1 ratio, anything higher like 1.2x might force you to put more money down.
If you need more feedback, happy to help. Best of luck!
- 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Mark Munson:
Hi @Nolan Dalton
As others have said, there are plenty of DSCR lenders out there. With a DSCR loan, you should expect up to 80% of the purchase price as the loan amount. As you talk to lenders, make sure you know the following:1 Rate Lock Policy - If the DSCR lender doesn't rate lock for 45 days, then I'd go elsewhere. Some DSCR lenders will float the rate until the appraisal is back, leaving you open to having the rate changed during the floating period.
2. Ask about Origination Fees - A good, well-capitalized DSCR lender shouldn't be charging more than 2 points, assuming the loan amount isn't too low. If they are telling you 2.5+ in origination fees, you can probably find cheaper money elsewhere.
3. What is the DSCR Requirement - Look for a 1 to 1 ratio, anything higher like 1.2x might force you to put more money down.
Feel free to reach out if you need more feedback, happy to help. Best of luck!
I would disagree with number 2 - in this environment, heavy rate buydowns are a common tool in the toolkit for lenders and borrowers to make deals work and are in no way indicative of "not being well-capitalized"
Harpoon Capital514 Reviews - 3yMark MunsonBusiness MemberLender · Orlando, FL · Member since 2022 · 440 posts · 300 votes
Quote from @Robin Simon:
Quote from @Mark Munson:
Hi @Nolan Dalton
As others have said, there are plenty of DSCR lenders out there. With a DSCR loan, you should expect up to 80% of the purchase price as the loan amount. As you talk to lenders, make sure you know the following:1 Rate Lock Policy - If the DSCR lender doesn't rate lock for 45 days, then I'd go elsewhere. Some DSCR lenders will float the rate until the appraisal is back, leaving you open to having the rate changed during the floating period.
2. Ask about Origination Fees - A good, well-capitalized DSCR lender shouldn't be charging more than 2 points, assuming the loan amount isn't too low. If they are telling you 2.5+ in origination fees, you can probably find cheaper money elsewhere.
3. What is the DSCR Requirement - Look for a 1 to 1 ratio, anything higher like 1.2x might force you to put more money down.
Feel free to reach out if you need more feedback, happy to help. Best of luck!
I would disagree with number 2 - in this environment, heavy rate buydowns are a common tool in the toolkit for lenders and borrowers to make deals work and are in no way indicative of "not being well-capitalized"
That’s a fair point in regards to doing a buy down, we see that quite often but we roll the buy down into the loan so those aren’t paid at closing, thus not costing the borrower funds out of pocket at the time of purchase or refinance.
It may not be indicative of their capitalization (albeit it is an indicator of their capital partners cost of capital to a degree), but there are numerous lenders still offering less than 2 or 2.5 points on DSCR loans out there, so it's worth shopping around for borrowers. The point being is that a lender that gouges a client is either getting their capital at a higher cost or they view the lender and borrower relationship as transactional and don't see the lifetime value of the relationship, in my opinion.
- 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Mark Munson:
Quote from @Robin Simon:
Quote from @Mark Munson:
Hi @Nolan Dalton
As others have said, there are plenty of DSCR lenders out there. With a DSCR loan, you should expect up to 80% of the purchase price as the loan amount. As you talk to lenders, make sure you know the following:1 Rate Lock Policy - If the DSCR lender doesn't rate lock for 45 days, then I'd go elsewhere. Some DSCR lenders will float the rate until the appraisal is back, leaving you open to having the rate changed during the floating period.
2. Ask about Origination Fees - A good, well-capitalized DSCR lender shouldn't be charging more than 2 points, assuming the loan amount isn't too low. If they are telling you 2.5+ in origination fees, you can probably find cheaper money elsewhere.
3. What is the DSCR Requirement - Look for a 1 to 1 ratio, anything higher like 1.2x might force you to put more money down.
Feel free to reach out if you need more feedback, happy to help. Best of luck!
I would disagree with number 2 - in this environment, heavy rate buydowns are a common tool in the toolkit for lenders and borrowers to make deals work and are in no way indicative of "not being well-capitalized"
That’s a fair point in regards to doing a buy down, we see that quite often but we roll the buy down into the loan so those aren’t paid at closing, thus not costing the borrower funds out of pocket at the time of purchase or refinance.
It may not be indicative of their capitalization (albeit it is an indicator of their capital partners cost of capital to a degree), but there are numerous lenders still offering less than 2 or 2.5 points on DSCR loans out there, so it's worth shopping around for borrowers. The point being is that a lender that gouges a client is either getting their capital at a higher cost or they view the lender and borrower relationship as transactional and don't see the lifetime value of the relationship, in my opinion.
Yeah - the way we view it is that we have a "net" hurdle we want to make on the loan, but are agnostic on whether that is earned on the backend or frontend or a mix of both - but to be transparent and flexible to give the borrowers all the options (up to them if they want a high rate / low or no points, low rate / high points, or mix)
Harpoon Capital514 Reviews - Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes3y
Quote from @Eliott Elias:
Traditional banks will not offer this, private investors do. Get with a mortgage broker or @Robin Simon
Mortgage banks will as well. We offer them. The biggest issue I run into is that the minimum loan amount is too high for most markets in our state.
- Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes3yThis is so true and so frustrating. I can't tell you how many times a bank has told me, "You can't do that," when in reality, what they meant was, "We won't do that."
Quote from @Trevor Naumann:
I have found the trick with banks to be that they will all only tell you what’s possible at their bank and not what’s possible in banking.
- 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Nicole Heasley Beitenman:
Quote from @Eliott Elias:
Traditional banks will not offer this, private investors do. Get with a mortgage broker or @Robin Simon
Mortgage banks will as well. We offer them. The biggest issue I run into is that the minimum loan amount is too high for most markets in our state.
what are the typically minimums you see? We are $75k across the board in every state
Harpoon Capital514 Reviews - 3yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
There are $50k minimums on blanket loans. Although I am starting to see those slowly go away.
LuxePrivate Investments LLC 572 Reviews - Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes3y
Quote from @Robin Simon:
Quote from @Nicole Heasley Beitenman:
Quote from @Eliott Elias:
Traditional banks will not offer this, private investors do. Get with a mortgage broker or @Robin Simon
Mortgage banks will as well. We offer them. The biggest issue I run into is that the minimum loan amount is too high for most markets in our state.
what are the typically minimums you see? We are $75k across the board in every state
I see $100-150k everywhere.
- Investor · Greater Capital Region, NY · Member since 2020 · 6 posts · 3 votes3y
I had a call with David Greene's mortgage company and they offer DSCR products, rates are a bit high but that's to be expected.
- 3yStephanie P.Pro MemberWashington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
Quote from @Nolan Dalton:
I want to get approved for a DSCR loan. I have walked through a few properties that I know would cash flow. Where can I find a lender? I talked with a manager at my local KeyBank and she told me "There is no such thing as a DSCR loan. That acronym is used as a ratio to determine if a loan would cash flow to qualify."
This would be my 4th property. I am 26 years old and I work in the trades. I am open to all options of lending.
Congratulations on your success. At 26, having 4 properties and looking for more is quite the story.
KeyBank man should be ashamed of himself.
I'd disagree with some of the assumptions in this thread.
Rate locks don't need to be for more than 30 days. 45 days can cost you a quarter point depending on the lender and it's really not necessary.
Always remember that origination points and discount points are two distinctly different things.
For us, some origination fees can be just 2 points and some are just 3 points. It depends on what you qualify for and what lender works best for your situation.
Here's an example. One of our lenders charges no points, but they charge a $1995 underwriting fee and a $600 closing charge. Another lender charges 1 point and $999 to underwrite. Either way, US Commercial is going to charge 2 points and a $450 processing fee. Both lenders will go to 75% cash out. Lender 1's rate is 9.49% on a 30 year fixed and Lender 2's rate is 7.5% on a 30 year fixed and both have a 5 year declining prepay. Loan amount is 200K. The borrower is a long term hold borrower. Using just those variations of closing costs, Lender 1's closing costs would be (not counting our 2 points) $2595. Lender 2 would be $2999. But oh no, you paid a point!! The monthly payment for Lender 1 would be $1680 and the monthly principal and interest payment for Lender 2 would be $1398. Same 200K loan.
Why would we send you to Lender 1 vs. Lender 2? Lender 1 doesn't require reserves. They don't care where the money for closing comes from and they don't need to season the funds. They just care that you have it and they really don't care if your property has a 1.0 DSCR or not. They want to make sure you have the credit and not much else. Lender 2 requires 6 months reserves. they want the borrower to document any large deposits and they want mortgage statements on any investment properties listed on the 1003.
The point is different lenders do different things and it's important to not generalize as a broker, but interview the borrower, find their pain points and marry them with a lender that will minimize those pain points for a successful close.
- Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes3y
@Nolan Dalton Ill reiterate what is said above and add that banking mortgage loan professionals only offer the products the bank offers. Many do not expand out of their box. I have originated many DSCR loans and am in one myself. Its a popular product and can accomplish your goals. Drop that bank and rely on the expertise in this thread. Licensed brokers can help with qualification, as its a very simple process, and get you your fifth property.
- Lender · Los Angeles, CA · Member since 2022 · 238 posts · 73 votes3y
Traditional banks don't have access to the different types of loans. DSCR or asset based loans don't require tax returns and usually can go up to 75% LTV and rate can range between 8%-11% depending on experience and fico score.
- Lender · NJ · Member since 2022 · 129 posts · 18 votes3y
Hahah there definitely is such a thing as a "DSCR loan" this type of financing is used to stabilize the property and cash flow. You need a lender that will qualify the deal based on property income and not yours. It's important that you ask your lender when they lock rates, how fast they move and what qualify gross income they'll take.
- Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes3y
@Nolan Dalton- most mortgage brokers and many mortgage bankers have this program
- Investor · Milwaukee/Chicago · Member since 2018 · 9 posts · 3 votes3y
Quote from @Stephanie P.:
Quote from @Nolan Dalton:
I want to get approved for a DSCR loan. I have walked through a few properties that I know would cash flow. Where can I find a lender? I talked with a manager at my local KeyBank and she told me "There is no such thing as a DSCR loan. That acronym is used as a ratio to determine if a loan would cash flow to qualify."
This would be my 4th property. I am 26 years old and I work in the trades. I am open to all options of lending.
Congratulations on your success. At 26, having 4 properties and looking for more is quite the story.
KeyBank man should be ashamed of himself.
I'd disagree with some of the assumptions in this thread.
Rate locks don't need to be for more than 30 days. 45 days can cost you a quarter point depending on the lender and it's really not necessary.
Always remember that origination points and discount points are two distinctly different things.
For us, some origination fees can be just 2 points and some are just 3 points. It depends on what you qualify for and what lender works best for your situation.
Here's an example. One of our lenders charges no points, but they charge a $1995 underwriting fee and a $600 closing charge. Another lender charges 1 point and $999 to underwrite. Either way, US Commercial is going to charge 2 points and a $450 processing fee. Both lenders will go to 75% cash out. Lender 1's rate is 9.49% on a 30 year fixed and Lender 2's rate is 7.5% on a 30 year fixed and both have a 5 year declining prepay. Loan amount is 200K. The borrower is a long term hold borrower. Using just those variations of closing costs, Lender 1's closing costs would be (not counting our 2 points) $2595. Lender 2 would be $2999. But oh no, you paid a point!! The monthly payment for Lender 1 would be $1680 and the monthly principal and interest payment for Lender 2 would be $1398. Same 200K loan.
Why would we send you to Lender 1 vs. Lender 2? Lender 1 doesn't require reserves. They don't care where the money for closing comes from and they don't need to season the funds. They just care that you have it and they really don't care if your property has a 1.0 DSCR or not. They want to make sure you have the credit and not much else. Lender 2 requires 6 months reserves. they want the borrower to document any large deposits and they want mortgage statements on any investment properties listed on the 1003.
The point is different lenders do different things and it's important to not generalize as a broker, but interview the borrower, find their pain points and marry them with a lender that will minimize those pain points for a successful close.
Thankyou for your incite and case study. It answered questions I had and opened up a few more to ponder on.
- 3yStephanie P.Pro MemberWashington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
Quote from @Jonathon Morris:
Quote from @Stephanie P.:
Quote from @Nolan Dalton:
I want to get approved for a DSCR loan. I have walked through a few properties that I know would cash flow. Where can I find a lender? I talked with a manager at my local KeyBank and she told me "There is no such thing as a DSCR loan. That acronym is used as a ratio to determine if a loan would cash flow to qualify."
This would be my 4th property. I am 26 years old and I work in the trades. I am open to all options of lending.
Congratulations on your success. At 26, having 4 properties and looking for more is quite the story.
KeyBank man should be ashamed of himself.
I'd disagree with some of the assumptions in this thread.
Rate locks don't need to be for more than 30 days. 45 days can cost you a quarter point depending on the lender and it's really not necessary.
Always remember that origination points and discount points are two distinctly different things.
For us, some origination fees can be just 2 points and some are just 3 points. It depends on what you qualify for and what lender works best for your situation.
Here's an example. One of our lenders charges no points, but they charge a $1995 underwriting fee and a $600 closing charge. Another lender charges 1 point and $999 to underwrite. Either way, US Commercial is going to charge 2 points and a $450 processing fee. Both lenders will go to 75% cash out. Lender 1's rate is 9.49% on a 30 year fixed and Lender 2's rate is 7.5% on a 30 year fixed and both have a 5 year declining prepay. Loan amount is 200K. The borrower is a long term hold borrower. Using just those variations of closing costs, Lender 1's closing costs would be (not counting our 2 points) $2595. Lender 2 would be $2999. But oh no, you paid a point!! The monthly payment for Lender 1 would be $1680 and the monthly principal and interest payment for Lender 2 would be $1398. Same 200K loan.
Why would we send you to Lender 1 vs. Lender 2? Lender 1 doesn't require reserves. They don't care where the money for closing comes from and they don't need to season the funds. They just care that you have it and they really don't care if your property has a 1.0 DSCR or not. They want to make sure you have the credit and not much else. Lender 2 requires 6 months reserves. they want the borrower to document any large deposits and they want mortgage statements on any investment properties listed on the 1003.
The point is different lenders do different things and it's important to not generalize as a broker, but interview the borrower, find their pain points and marry them with a lender that will minimize those pain points for a successful close.
Thankyou for your incite and case study. It answered questions I had and opened up a few more to ponder on.
My pleasure. Any additional questions, feel free to PM me.
Stephanie
- Member since 2019 · 9 posts · 2 votes3y
Quote from @Nicole Heasley Beitenman:
Quote from @Robin Simon:
Quote from @Nicole Heasley Beitenman:
Quote from @Eliott Elias:
Traditional banks will not offer this, private investors do. Get with a mortgage broker or @Robin Simon
Mortgage banks will as well. We offer them. The biggest issue I run into is that the minimum loan amount is too high for most markets in our state.
what are the typically minimums you see? We are $75k across the board in every state
I see $100-150k everywhere.
Just jumping into this thread rather than start a new one and my questions are related to this one.
Is the minimum loan amount shifting? I have been working with a MLO - delayed financing loan. We started the process with her lenders saying that we could do anywhere from 65% LTV to 75% LTV pretty comfortably with a minimum loan amount of 75K.
After starting the loan process, I learned that the lenders this MLO was working with were only offering 100K minimum. This won't work for the property because of the lower purchase price.Are there still plenty of lenders willing to work with a minimum loan amount of 75K with a 65% to 70% LTV?
- 3yMark MunsonBusiness MemberLender · Orlando, FL · Member since 2022 · 440 posts · 300 votes
Quote from @Michael Whillock:
Quote from @Nicole Heasley Beitenman:
Quote from @Robin Simon:
Quote from @Nicole Heasley Beitenman:
Quote from @Eliott Elias:
Traditional banks will not offer this, private investors do. Get with a mortgage broker or @Robin Simon
Mortgage banks will as well. We offer them. The biggest issue I run into is that the minimum loan amount is too high for most markets in our state.
what are the typically minimums you see? We are $75k across the board in every state
I see $100-150k everywhere.
Just jumping into this thread rather than start a new one and my questions are related to this one.
Is the minimum loan amount shifting? I have been working with a MLO - delayed financing loan. We started the process with her lenders saying that we could do anywhere from 65% LTV to 75% LTV pretty comfortably with a minimum loan amount of 75K.
After starting the loan process, I learned that the lenders this MLO was working with were only offering 100K minimum. This won't work for the property because of the lower purchase price.Are there still plenty of lenders willing to work with a minimum loan amount of 75K with a 65% to 70% LTV?
Yes, there are plenty of lenders still doing $75k. Most go up to 75-80% LTV on delayed purchase refinances. Feel free to reach out if you need a few options, happy to help.
- Member since 2023 · 24 posts · 8 votes3y
for DSCR = Annual Net Operating Income / Annual Debt-Service in a refinance deal
(1) is the Annual Net Operating Income just gross rents? so if its a 2 unit property and rents are 2500/2500 it is = 5,000
(2) is Annual Debt-Service the new loan amount? so Ie 750k?
Join the conversationCreate a free account to reply, vote on answers and follow this thread.