Qualifying for Mortgages Using DSCR

6 Replies

Hello BP!

I left my corporate job last year to be in real estate full time.  This new life is wonderful!  That said, I would like to refinance a condo, finance new acquisitions, etc. (beyond my existing portfolio) in the near future.

Are 30 year fixed cashout refi's out of the picture for someone without 2 years of self employment income history?  

I have heard that some banks will lend based off of DSCR (in lieu of debt to income). That said, I am curious to learn what the experience has been in the BP community with qualifying using DSCR. Are there other strategies to finance long term holds if you don't have sufficient income history?

I appreciate any insight you all have!  

If you have one year experience being self employed you can usually get financing depending on your credit and LTV.

Austin Irwin, Lender in OR (#1608785)

Our commercial portfolio lender requires a minimum DSCR of 1.25 as one criteria for granting a loan. I've never had a residential lender mention it as part of the criteria.

Originally posted by @John C.:

Hello BP!

I left my corporate job last year to be in real estate full time.  This new life is wonderful!  That said, I would like to refinance a condo, finance new acquisitions, etc. (beyond my existing portfolio) in the near future.

Are 30 year fixed cashout refi's out of the picture for someone without 2 years of self employment income history?  

I have heard that some banks will lend based off of DSCR (in lieu of debt to income). That said, I am curious to learn what the experience has been in the BP community with qualifying using DSCR. Are there other strategies to finance long term holds if you don't have sufficient income history?

I appreciate any insight you all have!  

 The low 30YF rates are backed by Fannie/Freddie.

There are portfolio and commercial fixed rate mortgages, but that fixed rate will be very very high. I don't offer them, waste of oxygen. 

Chris Mason, Lender in CA (#1220177) and California (#1220177)
415-846-9211

@John C. where are you investing? 

Like Chris Mason mentioned, 30YR Fixed will be a higher rate, I also think less and less are offering fixed rates now. 

Other than commercial banks, you can look to non-bank lenders (or specialty finance lenders) if you don't have income history. These lenders underwrite the loan the same way a commercial lender would, which means the primary focus is on the DSCR (1.25x). Your rate will be higher, anywhere from 6.5% - 8.5% usually, but it's another option, and you can always refi down the line.

@John C. As others have stated, you can get portfolio loans based on DSCR, but the rates will significantly higher compared to Fannie/Freddie loans.

Given that you are recently self employed, portfolio loans would be your only option. To get Fannie/Freddie loans, you need 2 yrs of self employed tax returns.

Upen Patel, Lender in (#National Lender NMLS 1374243)
(571) 331-5161

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