Best DSCR loans out there?

Most Popular Reply

Robin SimonBusiness Member
Lender 路 Austin, TX 路 Member since 2022 路 5k+ posts 路 4k+ votes
2y
Quote from @Jordan Ryan:

Hi everyone just wondering the opinions on the best companies out there for DSCR loans? Trying to buy a 3 family that needs some TLC maybe do a BRRR. I have talked to so many lenders around the same like 7% with 1-2 points up front . Any advice ? Thanks


Sharing here an article I published on BiggerPockets last year all about DSCR Loan options especially around the BRRRR Method - maybe can help!

https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...

[email protected]
Harpoon Capital514 Reviews
WebsiteView Page
9Reply
See this reply in the discussion

28 Replies

Jump to latestLatest
  • Devin PetersonBusiness Member
    Lender 路 Sarasota, FL 路 Member since 2022 路 2k+ posts 路 664 votes
    2y
    Quote from @Jordan Ryan:

    Hi everyone just wondering the opinions on the best companies out there for DSCR loans? Trying to buy a 3 family that needs some TLC maybe do a BRRR. I have talked to so many lenders around the same like 7% with 1-2 points up front . Any advice ? Thanks


    Seems about right with what you provided. Can you give a little more insight on your credit? Market rent? And anticipated LTV. How much deferred maintenance is needed?

    [email protected]860-538-3672
    ProAlpha Capital56 Reviews
    WebsiteView Page
    1Reply
  • AJ ExnerPro Member
    Lender 路 Springfield, MO 路 Member since 2023 路 652 posts 路 314 votes
    2y
    Quote from @Jordan Ryan:

    Hi everyone just wondering the opinions on the best companies out there for DSCR loans? Trying to buy a 3 family that needs some TLC maybe do a BRRR. I have talked to so many lenders around the same like 7% with 1-2 points up front . Any advice ? Thanks


    Unfortunately, that is kind of where we are at right now. Biggest thing would be to confirm the loan amounts and if they will lend to that particular area (being keen to make sure its not rural). Otherwise, we there until rates start to dip a little bit.

    Hopefully the 3 tenants will help in overcoming that rate until you can refinance down the road.

    [email protected]417-427-2612
    0Reply
  • Jacob Sherman
    12 Penns Trail Suite 138 Newtown, PA 18940 路 Member since 2023 路 1k+ posts 路 319 votes
    2y

    The DSCR wouldn't include renovation funds unfortunately and property has to be in livable condition to qualify for the DSCR loan . Rate in the 7's sounds about right . What is the scenario looking like ?

    0Reply
  • Ko KashiwagiPro Member
    Lender 路 Los Angeles, CA 路 Member since 2022 路 967 posts 路 445 votes
    2y

    Hi Jordan,

    Fix and flip loans are different than DSCR loans. For a DSCR loan, rates in the 7's with 1-2 points sound about right. I'd get quotes from a couple lenders and just go with the best one or the one you'd want to build a relationship with.

    310-848-9776
    1Reply
  • Derek BrickleyBusiness Member
    Lender 路 Ann Arbor, MI 路 Member since 2021 路 664 posts 路 226 votes
    2y

    I would agree, the rate is about par.  However if you are looking for options without points then you would either want to consider taking a higher rate or increasing the term of the prepayment penalty.  Plus, if you are using a broker their broker fees will typically be an additional 1-2 points.

    [email protected]734-645-7722
    Gold Star Mortgage Financial Group548 Reviews
    WebsiteView Page
    0Reply
  • Jordan Ryan
    OP
    Member since 2023 路 22 posts 路 16 votes
    2y

    Hi everyone thanks for replies. Yea I have good credit and the house is livable just needs som tlc. I will pay for the the renovations myself after I buy it. Was thinking to refi in about 6 months and hopefully get some of my down payment back since I鈥檓 getting it a little cheaper then market value and fixing it up a little. Some what if a brrr the rents around here are sky high so that should help . Thank you 馃檹

    0Reply
  • Jordan Ryan
    OP
    Member since 2023 路 22 posts 路 16 votes
    2y
    Quote from @Devin Peterson:
    Quote from @Jordan Ryan:

    Hi everyone just wondering the opinions on the best companies out there for DSCR loans? Trying to buy a 3 family that needs some TLC maybe do a BRRR. I have talked to so many lenders around the same like 7% with 1-2 points up front . Any advice ? Thanks


    Seems about right with what you provided. Can you give a little more insight on your credit? Market rent? And anticipated LTV. How much deferred maintenance is needed?

    Yea great credit 750 , market rents are high so close to 1% of purchase price which is great for near Boston these days . One lender I spoke to said they can do DSCR on it 7-8% no prepayment and up to 90% ltv which sounds great because then I don鈥檛 really need to refi right away because not puting the 20% into it I鈥檓 find puting 10% if it can cash flow a little and on to the next so they are in the lead for now. Thanks 
    0Reply
  • Robin SimonBusiness Member
    Lender 路 Austin, TX 路 Member since 2022 路 5k+ posts 路 4k+ votes
    2y
    Quote from @Jordan Ryan:

    Hi everyone just wondering the opinions on the best companies out there for DSCR loans? Trying to buy a 3 family that needs some TLC maybe do a BRRR. I have talked to so many lenders around the same like 7% with 1-2 points up front . Any advice ? Thanks


    Sharing here an article I published on BiggerPockets last year all about DSCR Loan options especially around the BRRRR Method - maybe can help!

    https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    9Reply
  • Jordan Ryan
    OP
    Member since 2023 路 22 posts 路 16 votes
    2y
    Quote from @Derek Brickley:

    I would agree, the rate is about par.  However if you are looking for options without points then you would either want to consider taking a higher rate or increasing the term of the prepayment penalty.  Plus, if you are using a broker their broker fees will typically be an additional 1-2 points.

    Yes it seems about as good as I鈥檓 going to find. I have called about 10 companies pretty much hearing all the same things.  Thanks for reply 
    1Reply
  • Givo Aghasi
    Lender 路 Los Angeles, CA 路 Member since 2022 路 238 posts 路 73 votes
    2y

    @Jordan Ryan I highly suggest teaming up with a broker who you'd want to build a relationship with and truly understands the ins and outs of different underwriting guidelines for fix & flip and DSCR loans.

    1Reply
  • Lien VuongBusiness Member
    Real Estate Agent 路 Boston, MA 路 Member since 2018 路 2k+ posts 路 1k+ votes
    2y

    Best things for Boston area DSCR (commercial loans) are through local banks as they have the most competitive rates right now. What you have been offered is well aligned with market though, typically at 75% LTV.

    [email protected]
    The Elle Group5153 Reviews
    WebsiteView Page
    0Reply
  • Jordan Ryan
    OP
    Member since 2023 路 22 posts 路 16 votes
    2y

    Yea I鈥檓 getting mostly around the same numbers honesly just very hard to get a a decent coc return with these rates. I run the numbers with even 5 or 6% and they great but 7+ just not good 

    1Reply
  • Nick BelskyBusiness Member
    Residential and Commercial Broker 路 Member since 2021 路 1k+ posts 路 704 votes
    2y
    Quote from @Jordan Ryan:

    Yea I鈥檓 getting mostly around the same numbers honesly just very hard to get a a decent coc return with these rates. I run the numbers with even 5 or 6% and they great but 7+ just not good 


    Just to add... if rate alone is making or breaking your deal, then it's already a losing deal.  Rate is but a factor and is easily offset by many other actions that you can take as an investor.  

    Cheers!

    [email protected]
    Belsky Mortgage, LLC527 Reviews
    WebsiteView Page
    0Reply
  • Jay S.Pro Member
    Lender 路 San Francisco Bay Area 路 Member since 2019 路 51 posts 路 46 votes
    2y

    Hi Jordan. That's a good question. There are thousands of Lenders out there which provide different DSCR loan selections and everyone is going to have different rates and terms and costs which can become very confusing.

    Rather than comparing Lenders/DSCR loans solely based on these factors, I would advise you to focus on below questions and prioritize what you really need in the DSCR loan/Lender?

    Example: 

    1. Is 15% down payment for DSCR is more important to you? Or are you ok with 20% down?

    2. Is closing in LLC is important?

    3. Is having debt not reported on credit is your priority?

    4. Is rate or terms your top priority?

    5. Is origination costs makes you select the Lenders?

    6. Is Fast closing or easy underwriting important?

    We originate loans with 100+ lenders and will tell you that you cannot have All of the above :) 

    Just set top 2-3 points of what matters to you most and that can help you in selecting which broker/lender to go with. Hope this helps! 

    [email protected]408-832-8200
    3Reply
  • Jordan Ryan
    OP
    Member since 2023 路 22 posts 路 16 votes
    2y

    I actually have been working with someone at the one brokerage they are high up on my list as of now. Thanks for the info 

    1Reply
  • Jose Delatorre
    Member since 2021 路 1 post 路 4 votes
    2y

    Hi Jordan do you mind sharing who your top lenders were and why you chose the one you ended up going thru. I also have a 3 family that I'm trying to refinance with a DSCR and I am concerned with the cash flows its in Chicago, IL. Also I am trying to hold onto it for the next 10 yrs at lease so if the 54321 offers me the lowest rate I would lean towards it. Credit is 740+. Thanks!

    4Reply
  • Jordan Ryan
    OP
    Member since 2023 路 22 posts 路 16 votes
    2y
    Quote from @Jose Delatorre:

    Hi Jordan do you mind sharing who your top lenders were and why you chose the one you ended up going thru. I also have a 3 family that I'm trying to refinance with a DSCR and I am concerned with the cash flows its in Chicago, IL. Also I am trying to hold onto it for the next 10 yrs at lease so if the 54321 offers me the lowest rate I would lean towards it. Credit is 740+. Thanks!

    Hi , I pretty much found many of them to be around the same but what I do recommend and what I did was call as many local banks and credit unions as I could and ask them rates , amortization schedule, origination fees, pre payment  penalties , refinance options if rates go down , as many things as you can think of  and write it all down for each one. Most of the time you can find a local bank or credit union that will beat these country wide lenders In my experience. If not try KO at investor property loan . Or Robert Porter Launch financial and see what they have to offer. I had a much bigger building under agreement 15 unit launch financial had my rate in high 6鈥檚 with 30 year am which was great the deal ended up falling apart (not their fault seller misrepresentation) but I do like them and you can usually get them to lower their fees. Both are super nice people easy to talk too I鈥檓 just not sure if they have minimum size  def worth a call! 

    2Reply
  • Zach Edelman
    Lender 路 New York, NY 路 Member since 2022 路 1k+ posts 路 1k+ votes
    2y

    Not sure if you have solidified/chosen a lender yet, but BP has a list of reccomended DSCR lenders that I think would be great for you to check out. Secondly a 7% rate with 1-2 points depending on LTV, FICO, DSCR, and prepayment penalty does sound fair/market standard. Think you're getting a solid deal if those are your terms.

    2Reply
  • Caleb Mooney
    Lender 路 Phoenix, AZ 路 Member since 2024 路 5 posts 路 3 votes
    2y
    Quote from @Jose Delatorre:

    Hi Jordan do you mind sharing who your top lenders were and why you chose the one you ended up going thru. I also have a 3 family that I'm trying to refinance with a DSCR and I am concerned with the cash flows its in Chicago, IL. Also I am trying to hold onto it for the next 10 yrs at lease so if the 54321 offers me the lowest rate I would lean towards it. Credit is 740+. Thanks!


     Hi Jose, rates will generally be in the 7's with the lender taking 1-2 points. This is what we offer, and we can offer interest only payments which will help with cash flow. Happy to answer any questions you have, feel free to DM me.

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor 路 Chicago, IL 路 Member since 2016 路 4k+ posts 路 2k+ votes
    2y

    Hey @Jordan Ryan - Consider connecting with @Cam Schwartz... he has some great private money products at his new business called vert!  He is out of Chicago, but I believe he can cover all across the country.

    [email protected]
    Quality Builders4.966 Reviews
    WebsiteView Page
    2Reply
  • Cam SchwartzBusiness Member
    Lender 路 Chicago, IL 路 Member since 2024 路 102 posts 路 48 votes
    2y

    Thanks @Jonathan Klemm.

    @Jordan Ryan, will echo what others have shared which is that 7% and 1-2 points is fairly market on DSCR loans at this time. As others have also noted, DSCR loans are separate from rehab loans which are often structured as hard money loans bundled with the upfront purchase.

    We fund both hard money for the purchase + rehab as well as long-term DSCR loans for the cash out refinance in BRRRR projects. Happy to be helpful with both if you're comparing rates.

    [email protected]847-702-6940
    Vert510 Reviews
    WebsiteView Page
    1Reply
  • Patrick Aukes
    Real Estate Agent 路 Woodland 路 Member since 2023 路 5 posts 路 4 votes
    2y
    Quote from @Jordan Ryan:
    Quote from @Devin Peterson:
    Quote from @Jordan Ryan:

    Hi everyone just wondering the opinions on the best companies out there for DSCR loans? Trying to buy a 3 family that needs some TLC maybe do a BRRR. I have talked to so many lenders around the same like 7% with 1-2 points up front . Any advice ? Thanks


    Seems about right with what you provided. Can you give a little more insight on your credit? Market rent? And anticipated LTV. How much deferred maintenance is needed?

    Yea great credit 750 , market rents are high so close to 1% of purchase price which is great for near Boston these days . One lender I spoke to said they can do DSCR on it 7-8% no prepayment and up to 90% ltv which sounds great because then I don鈥檛 really need to refi right away because not puting the 20% into it I鈥檓 find puting 10% if it can cash flow a little and on to the next so they are in the lead for now. Thanks 

    If they are quoting 10% down on DSCR, let me get their contact info if they loan in CA.

    Thanks!

    0Reply
  • Stacy RaskinBusiness Member
    Lender 路 Member since 2022 路 1k+ posts 路 501 votes
    2y

    Rates have been coming down the last couple weeks and it's possible to get rates in the 6s for DSCR loans depending on the LTV (loan to value) and borrower credit score.

    More info on what goes into DSCR rates and overall program details:

    DSCR loans won't use your income to underwrite the loan.

    DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

    Here's a bit more in detail about how rates are calculated for DSCR loans:

    1. Credit score- the higher the best. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.


    2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

    3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

    4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.

    I've included an example below to help illustrate this.

    So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

    See example below:

    DSCR < 1

    Principal + Interest = $1,700

    Taxes = $350, Insurance = $100, Association Dues = $50

    Total PITIA = $2200

    Rent = $2000

    DSCR = Rent/PITIA = 2000/2200 = 0.91

    Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

    DSCR >1

    Principal + Interest = $1,500

    Taxes = $250, Insurance = $100, Association Dues = $25

    Total PITIA = $1875 Rent = $2300

    DSCR = Rent/PITIA = 2300/1875 = 1.23

    If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.

    DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.

    Happy to connect to discuss further. 

    [email protected]818-770-0340
    Bright Skyline518 Reviews
    WebsiteView Page
    2Reply
  • Scott TitusPro Member
    Rental Property Investor 路 Lake Ozark, MO 路 Member since 2017 路 102 posts 路 86 votes
    2y
    Quote from @Jordan Ryan:

    I actually have been working with someone at the one brokerage they are high up on my list as of now. Thanks for the info 


     How was your experience? Would you share their contact information if it went well?

    0Reply
  • Bryce Gubler
    Investor 路 Oakland 路 Member since 2019 路 16 posts 路 3 votes
    1y
    Quote from @Jordan Ryan:
    Quote from @Devin Peterson:
    Quote from @Jordan Ryan:

    Hi everyone just wondering the opinions on the best companies out there for DSCR loans? Trying to buy a 3 family that needs some TLC maybe do a BRRR. I have talked to so many lenders around the same like 7% with 1-2 points up front . Any advice ? Thanks


    Seems about right with what you provided. Can you give a little more insight on your credit? Market rent? And anticipated LTV. How much deferred maintenance is needed?

    Yea great credit 750 , market rents are high so close to 1% of purchase price which is great for near Boston these days . One lender I spoke to said they can do DSCR on it 7-8% no prepayment and up to 90% ltv which sounds great because then I don鈥檛 really need to refi right away because not puting the 20% into it I鈥檓 find puting 10% if it can cash flow a little and on to the next so they are in the lead for now. Thanks 

     Hi Jordan, I'm currently looking for a lender and saw your post.  Could you share the lender who quoted you those terms?  Thanks Bryce

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free