Investor Demand Shifting Away From Traditional DTI Models

[Kelly Schroeder]

Seeing more investors prioritize cash-flow-based lending options over traditional income-based approvals. DSCR, bridge, and portfolio loans are gaining traction. What lending trends are you seeing next year?

[David Atis]

Alongside DSCR, I'm seeing more investors lean into bank statement lending as an alternative. A lot of borrowers that are self employed have solid personal or business cash flow, but DSCR just doesn't work because of conservative rent calculations, higher insurance costs, or interest rate pressure.

With a bank statement program, qualification is based on 12 or 24 months of business or personal bank statements rather than strictly using property cash flow. Using actual expenses instead of a flat expense ratio often allows borrowers to qualify for more income and larger loan amounts. This option is only available to investors that are self employed or other business owners with strong revenue but heavy write offs.

Going into next year I expect investors to continue mixing strategies, using DSCR when the deal supports it and bank statement loans when the borrower profile is stronger than the property's cash flow.