DSCR vs Bank Statement Loan for Self Employed?

10 Replies

Hi,

I'm self employed, but my business didn't have that much income this past year.  I sold a property this year and made a good amount in the stock market, so I have those proceeds available to purchase a primary residence for myself as well as a rental property (can be one property for both).  I have a 800+ credit score.

I'm trying to get financing, but I won't qualify for conventional because of the stable income requirement, so I'll need to use a nonQM.

Which is better, a bank statement loan or a DSCR loan? What's the catch here? Is it just the higher interest rates? Do the higher rates make it more difficult to make the numbers work on a deal? If the DSCR is based on the property income, is there a limit to how many of these someone can do or is the limit just how much cash you have available to use for the 20-30% downpayment?

Should I be targeting a duplex or a multifamily (8+)?

I've managed single rentals before, but multi is a different story where I feel a property manager would be preferred (right?).

I'm currently in Columbus, Ohio and I'm quite familiar with the city, but it's recently gotten expensive (pricing downtown like they think this is NYC) and difficult to find any deals.

What do you all think is a good deal when analyzing properties?

Thank you,

Dan

Originally posted by @Daniel Stanojevic :

Hi,

I'm self employed, but my business didn't have that much income this past year.  I sold a property this year and made a good amount in the stock market, so I have those proceeds available to purchase a primary residence for myself as well as a rental property (can be one property for both).  I have a 800+ credit score.

I'm trying to get financing, but I won't qualify for conventional because of the stable income requirement, so I'll need to use a nonQM.

Which is better, a bank statement loan or a DSCR loan? What's the catch here? Is it just the higher interest rates? Do the higher rates make it more difficult to make the numbers work on a deal? If the DSCR is based on the property income, is there a limit to how many of these someone can do or is the limit just how much cash you have available to use for the 20-30% downpayment?

Should I be targeting a duplex or a multifamily (8+)?

I've managed single rentals before, but multi is a different story where I feel a property manager would be preferred (right?).

I'm currently in Columbus, Ohio and I'm quite familiar with the city, but it's recently gotten expensive (pricing downtown like they think this is NYC) and difficult to find any deals.

What do you all think is a good deal when analyzing properties?

Thank you,

Dan

I would recommend cold calling for better deals. That is what I do here in Columbus, Ohio. If you find a good enough deal then you can partner with someone with the money.

 

@Daniel Stanojevic I have been self-employed and it was very difficult getting financing for my primary residence. I have never used a bank statement loan but did some research and found some lenders available with a higher down payment and higher interest rates. I ended convincing my contractor to mske a w2 for a few months to get approved for an FHA. If your buying investment properties with an LLC, single to multiplex, I work with multiple lenders that can help. Let's connect and I will be glad to help.

Bank statement loan you must have income deposits in 2020, excluding capital gains, real estate sales, moving money. Bank statement loan rates are in the 4's but it sounds like you won't make it work. Debt Service - 70% of the assets that you won't use for the purchase less 30 year amortization. Rates in the high 4's You need liquid money- checking, savings, CD get 30% haircut 401k/IRA/stock perhaps 35-40 depending on your age

@Daniel Stanojevic

Don't torture yourself with a bank statement loan. In your situation, your deposits may be declining and a red flag to underwritring. Go DSCR. Much easier and rates are comparable depending on score, ltv etc...

Stephanie

You may use a spouse that has a stable W2 income. For conventional loan with rental property, as long as the property is cash-flowing after 1.3 DSCR (75% of gross) and at least 25% down, the bank may still underwrite you. But not all banks. That's the trick.

Originally posted by @Daniel Stanojevic :

Thanks for the replies.  @Remington Lyman as @Luke Rorech asked, which list are you cold calling?  I don't mind doing that to find a good deal. Since you're a realtor, if you come across a good off-market deal, let me know.

Thank you @Caroline Gerardo and @Stephanie P. , I appreciate the great information.

@Carlos Ptriawan Not an option, but thanks.

I have been cold calling multifamily property owners in Columbus, Ohio

 

Commercial lenders don't look at income, taxes, dti, employment, etc. Credit score and cash flow of the rental is what determines approval. They also don't report the mortgages on your credit.

Hope this helps :)