DSCR Loan... Looking for lender who will accept 20% or lower on DSCR

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DSCR Loan... Looking for lender who will accept 20% or lower on DSCR

Lauren Ruppert
Rental Property Investor · Member since 2019 · 67 posts · 29 votes

I'm looking for a DSCR lender who will accept 15-20% down. Credit score in mid 700's. Please do not pull the bait and switch...I'll blow you up on Yelp and BBB. Current portfolio is small (12 doors) looking to add to it without giving up all of my liquidity... no more than 20% down....

If you know of a lender that you've PERSONALLY used, let me know. 

Thanks a bunch!!!!!!

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Jonathan Taylor
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
3y

@Lauren Ruppert 15% down isnt a reality in this market for turn key DSCR purchases. Most purchases do not debt cover at 20% down so the market is dictating purchases in the 25% range. The property has to debt cover for rates and terms to be competitive. I have lenders that can do purchases without DSCR being considered but rates are higher.

For experienced borrowers looking to add value, like a fix and flip, 15% down is realistic but loan minimums need to be met and borrower needs at least 6+ flips in the past 36 months.

Hope that helps. Id investigate thoroughly any lender offering less than 20% down at market rents and asking price. 

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  • Clayton Silva
    Lender · CA · Member since 2018 · 638 posts · 393 votes
    3y

    We offer those. Feel free to shoot me a DM! I have used a lot of our DSCR products myself.

    0Reply
  • Jonathan Taylor
    Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
    3y

    @Lauren Ruppert 15% down isnt a reality in this market for turn key DSCR purchases. Most purchases do not debt cover at 20% down so the market is dictating purchases in the 25% range. The property has to debt cover for rates and terms to be competitive. I have lenders that can do purchases without DSCR being considered but rates are higher.

    For experienced borrowers looking to add value, like a fix and flip, 15% down is realistic but loan minimums need to be met and borrower needs at least 6+ flips in the past 36 months.

    Hope that helps. Id investigate thoroughly any lender offering less than 20% down at market rents and asking price. 

    1Reply
  • Katherine Blazer
    Lender · Tampa/St. Petersburg/Sarasota FL and Knoxville/Sevierville/Maryville, TN · Member since 2018 · 361 posts · 178 votes
    3y

    @Lauren Ruppert Hi Lauren, I work with a few funds that start at 20% down. Unfortunately, in my area, at least rental comps are killing the deals. When the rental comps do not come in, it can lower the DSCR and, in turn, lower the loan amounts because they want it to cash flow.

    0Reply
  • Adam Bartling
    Lender · Rosenberg, TX · Member since 2022 · 287 posts · 130 votes
    3y

    @Lauren Ruppert we do have options for 15% DP on a DSCR, but you need not compare the rates to the 20-30%DP, it will be higher since more risk is on the lender. This will be in a MSA 50,000+ Can you send me specifics to your deal.

    0Reply
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 533 votes
    3y

    I work with lenders that do 20% down if the property is cash flowing or looks to cash flow with market rents. If vacant, some will take that into consideration. The pricing on the rate will be higher than 25% down but it's doable depending on the potential property. Better pricing usually starts at about 1.2 so the rents are covering 120% of the expenses. 

    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. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. 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. 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

    Lender terms and fees vary widely. As a mortgage broker, I shop my clients' loan to get them the best possible loan and the least fees while helping them to reach their investment goals. 

    [email protected]818-770-0340
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