DSCR loan AND financing down payment?

Question

Hi amazing BP community! I've had such great success in connecting here!
i have a Buy and Hold opportunity in Memphis and am reaching out for a DSCR loan, but also am looking to find ways to finance my down payment and closing costs, and hope to make the number still work. Any thoughts, plans, schemes I could consider to accomplish this?

Claire Davis · Answer

I second Doug's suggestion with an initial hard money loan to get you in the property and then refinancing into a long-term DSCR. We are a local hard money lender based in Memphis, but we do require a little "skin in the game" as Jake mentioned - so it wouldn't be $0 out of pocket at the beginning. That said, you could roll those out-of-pocket costs into your DSCR and get paid back on the refi. Let me know if you'd like to talk more about it.

Jake Yuskaitis · Answer

it will be messy because you have no skin in the game. If you don't have cash for the deal, then I suggest the deal not be done. That being said, there are lenders who will not source funds, allow seller seconds, DP loans, etc.

Izaiah Barba · Answer

Hey Chris! A DSCR loan is a solid play for a Memphis buy‑and‑hold, since it underwrites off rent income instead of your personal ratios. For the down payment and closing costs consider a small private money partner, offer them a clear return and let them cover that gap. You can also explore a HELOC on your primary home if the rates look good. If you want more ideas there’s a Skool community I use, just peer support and fresh strategies.

Chris Peregoy · Answer

@Izaiah Barba thank you!

Douglas Skipworth · Answer

Hi, @Chris Peregoy.

We often see investors in Memphis use a hard money loan to meet the 90-day seasoning period that some DSCR have.  The investors then finance the max LTV with the DSCR lender to get their investment dollars back.  Not surprisingly, the 2 keys to being successful with this approach are (1) getting into the property for as little all-in money as possible and (2) maximizing the appraised value.

You are thinking like a savvy investor!

Chris Peregoy · Answer

@Douglas Skipworth this is an interesting approach! I'd love to learn more

Erik Estrada · Answer

Hi Chris,

Most DSCR lenders will not allow you to use an unsecured loan for the for the downpayment. You can however use a HELOC or Cash Out proceeds from a refinance for the downpayment and reserves.

Chris Peregoy · Answer

@Andrew Zamboroski something to consider for sure! Thank you

Chris Peregoy · Answer

@Jake Yuskaitis thank you for the feedback! I'm going to try and get creative, worst case I'll wholesale the deal

DSCR loan AND financing down payment?

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