DSCR Loans - Pennsylvania Co-Owned Properties (One partner abroad)

[Evan Kline]

Hi All –

Thanks in advance for your feedback. I'm researching DSCR financing options before moving forward within the next ~2-3 months on this. I've read some other posts on the topic, but wanted to start a separate one with a few specific questions.

Background:

• - My partner and I own 2 properties with conventional financing, we have a Tenant in Common agreement between us
• - Financing was only set-up under my partner’s name by mistake
• - We are both US citizens; however I live abroad (receive a foreign salary) and file US taxes
• - Good credit scores
• - Both properties cash flow with PITIA ratios of ~ 1.2

We'd like to re-finance so that we are both on the financing and it seems that a DSCR loan would be a good option given that I live outside of the US.

Questions:

• - Could we close a DSCR loan virtually or would we both need to be physically present for closing? (Virtual closing is preferred)
• - Would we need to have an LLC to move these properties under a DSCR loan, or could my partner and I leave the properties in our names?
• - Would a DSCR loan for Pennsylvania properties trigger title insurance? If the above is yes and we would need to pay for title insurance anyways, then I assume it would make sense to move these under an LLC
• - Are you aware of any watch-outs or other considerations we should factor-into our decision?

Thanks again,
Evan

[AJ Exner]

Evan,

You guys do sound like prime candidates for DSCR style lending as you continue to expand. To answer your first question, many DSCR transactions happen with mobile notaries or I've even closed a few at foreign consulates so that wouldn't be a problem.

I'll try to tack each question one by one, you could leave them in personal names, but it is not preferred and that is both lender and state specific. Some lenders require that it is done in some kind of entity depending one what state the property is in.

Most DSCR lenders would require that insurance, so you would want to confirm as you get started.

The only other thing that pops out to me is to be aware of varying Prepayment Penalty requirements in Pennsylvania. DSCR loans are going to usually have a set period (usually 3-5 years) that they would apply a small financial penalty for refinancing or selling before the 3-5 years is up. Pennsylvania is a little different and a lot of lenders have no-prepayment penalties in PA but you might have to pay some points or see a rate increase because of that. There is also a Transfer Tax that Pennsylvania requires that is always a 'fun' reminder on the final HUD.

Good luck as you guys are working on expanding your portfolio, happy to connect and help if I can!