DSCR Loan Rates

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Stacy RaskinBusiness Member
Lender · Member since 2022 · 1k+ posts · 500 votes
2y
Quote from @Trey Belmore:

It is a new construction single family 1-unit residence. Refinancing to payoff the construction note and also getting cash out. Property valued at ~$2.1M. Just trying to determine if this rate is competitive with the market.


 Based on the info you gave, it's competitive:

Sample pricing chart. Numbers in parenthesis is a credit to the transaction.

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  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 500 votes
    2y

    Is this a cash out refinance or a purchase? Cash out rates will be higher for the same borrower profile compared to a purchase. What is the purchase price or estimated value for the refinance?

    Some more info on DSCR rates and how they're calculated:

    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+ generally gets best pricing for investment property loans with most lenders

    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

    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
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  • Trey Belmore
    OP
    Lender · Dallas, TX · Member since 2023 · 18 posts · 7 votes
    2y

    It is a new construction single family 1-unit residence. Refinancing to payoff the construction note and also getting cash out. Property valued at ~$2.1M. Just trying to determine if this rate is competitive with the market.

    0Reply
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 500 votes
    2y
    Quote from @Trey Belmore:

    It is a new construction single family 1-unit residence. Refinancing to payoff the construction note and also getting cash out. Property valued at ~$2.1M. Just trying to determine if this rate is competitive with the market.


     Based on the info you gave, it's competitive:

    Sample pricing chart. Numbers in parenthesis is a credit to the transaction.

    [email protected]818-770-0340
    Bright Skyline518 Reviews
    WebsiteView Page
    1Reply
  • Jared RineBusiness Member
    Lender · Sacramento, CA · Member since 2009 · 1k+ posts · 277 votes
    2y

    @Trey Belmore...I would say due to the PPP, yes. 

    Jared Rine United Lending Partners53 Reviews
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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    2y
    Quote from @Trey Belmore:

    Hi-

    I have a DSCR loan at $1.575M with 75% LTV and DSCR ratio is just over 1.0. Credit score is 736. I am being quoted a 8.25% on a 2 YR PPP. Is this competitive?

     @Trey Belmore How long have you had your current construction loan? Also, on a DSCR loan the upfront cost is just an important to compare as the rate.

    Hurst Real Estate, INC4.989 Reviews
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  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y
    Quote from @Trey Belmore:

    It is a new construction single family 1-unit residence. Refinancing to payoff the construction note and also getting cash out. Property valued at ~$2.1M. Just trying to determine if this rate is competitive with the market.


     Sounds generally competitive - cash-out 75% on a large loan is still an expensive proposition right now

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  • River SavaPro Member
    Lender · USA · Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Trey Belmore:

    Hi-

    I have a DSCR loan at $1.575M with 75% LTV and DSCR ratio is just over 1.0. Credit score is 736. I am being quoted a 8.25% on a 2 YR PPP. Is this competitive?

    Hey Trey - Seems fairly competitive especially with the pre pay as others have mentioned. Are you set on the 2 year? Also, I’m curious about the points. Would love to connect and talk further about this. 
    [email protected]
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  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    2y

    On a 2 year, assuming you aren't paying points for that rate, yes. If that's including a buydown, then no. Bumping it to a 3-year could potentially save you ~0.25% or so. 

    [email protected]330-354-6590
    Brittany Minocchi - Barrett Financial Group, LLC522 Reviews
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  • Jacob Sherman
    12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes
    2y
    Quote from @Trey Belmore:

    Hi-

    I have a DSCR loan at $1.575M with 75% LTV and DSCR ratio is just over 1.0. Credit score is 736. I am being quoted a 8.25% on a 2 YR PPP. Is this competitive?


     8.125% with 0 points 

    0Reply
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