Recommended DSCR lenders in DFW?
Investor · Member since 2022 · 49 posts · 17 votes
Recommended DSCR lenders in DFW?
Most Popular Reply
Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votesQuote from @Eyal Goren:
We're looking for lenders who offer DSCR loans in DFW.
What's the best place to look for them? So far we only called banks that popped up on Google maps.
Can look at BP Find A Lender tool: https://www.biggerpockets.com/business/finder/lenders
google search etc.
Also, as some others have commented, DSCR Lenders tend to be national platforms and not really tied to your local market to get the best rates and terms, sharing this article I wrote last year for BP that broke this down too in case it helps!
https://www.biggerpockets.com/blog/dscr-loans-terms-to-know
Types of Rental Property Lenders
While a lot of these aren’t official and can have some overlap, here are the types of lenders that you will encounter when getting loans for your rental properties:
Non-QM lenders
These are lenders that provide mortgage loans, both for owner-occupied and non-owner-occupied (rental properties), that do not qualify for CFBP mortgage requirements, which generally are defined as loan requirements for purchase by government-sponsored enterprises (GSE). Qualifying mortgage loans typically require stable W-2 employment and DTI ratio requirements, so non-QM lenders primarily serve homeowners who are self-employed or employed as 1099 contractors, non-U.S. citizens, and real estate investors.
DSCR lenders
These are private lenders that lend a specific loan product—DSCR loans—and these lenders only provide loans for investors. These lenders have proprietary guidelines that do not have to confirm to GSE agency guidelines. DSCR lenders strictly serve real estate investors, particularly those investors who are scaling past a couple of properties (and thus struggle to qualify for conventional loans), or those who are pursuing innovative strategies such as the BRRRR method, short-term rentals, and multifamily investing.
Banks
While many real estate investors use the term “bank” to describe all lenders that offer rental property loans, banks should be differentiated as financial institutions that operate under strict licensing and regulatory requirements.
Conventional lenders
These are lenders, including banks and lenders that can also offer non-QM loans, that primarily focus on qualifying mortgages or loans that follow the standardized GSE requirements.
Private lenders
Private lenders should be defined as mortgage lending companies that are not non-banks (and thus not subject to banking regulations and licensing requirements) but also have all the infrastructure of a lending company (including necessary licensing, infrastructure, and capital). Private lenders primarily focus on serving real estate investors and can be much more forward thinking and flexible than heavily regulated and standardized peers (such as banks and conventional lenders).
Private money
The term “private money” should be differentiated from private lenders. Private money generally refers to individuals who invest in real estate through lending personal capital, rather than as a full-fledged lending company.
Hard money lenders
Hard money lenders are typically private lenders that typically lend on higher-risk real estate projects, such as properties that need heavy rehab or for borrowers that have challenged credit. These loans are typically of short duration and have higher interest rates and fees, and aren’t used for stabilized properties.
While these definitions are distinct, there is much overlap between the lending types, where one lender can fall into multiple categories. Common examples of this include private lenders that are both DSCR lenders and hard money lenders, or banks that offer conventional and non-QM mortgage loans.
Harpoon Capital514 Reviews
12 Replies
- Lender · Nashville, TN · Member since 2024 · 700 posts · 284 votes1y
Hey Eyal,
DSCR loans can be originated by almost any lender in the country, there's plenty of great ones around here on BP. I would go with someone who specializes in the investment space as you will get best pricing, product knowledge & process.
A broker can make a break your deal by where they place your loan; Are you looking to purchase or refinance?
- 1yStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 497 votes
Having a mortgage broker that specializes in DSCR loans can be helpful as DSCR lenders have different guidelines depending on the lender and that can potentially help you to get the best possible terms such as a lower DSCR ratio or a better rate depending on the borrower's credit profile. DSCR lenders generally do loans across the country and don't advertise directly to the public. The physical location of the mortgage broker or lender isn't important as the work is done over the phone and email.
Also, the loans aren't regulated in the same way as owner occupy loans so important to work with someone with a good reputation as there are brokers and lenders who will mention terms at the beginning that sound really good and they will change them at the last minute because they can.
In case helpful, here's more about DSCR loans: 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. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.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 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
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.
Bright Skyline518 Reviews - 1yDevin PetersonBusiness MemberLender · Sarasota, FL · Member since 2022 · 2k+ posts · 664 votes
Quote from @Eyal Goren:
We're looking for lenders who offer DSCR loans in DFW.
What's the best place to look for them? So far we only called banks that popped up on Google maps.
Eyal, some of the best DSCR lenders may not be located locally. There are dozens of fantastic DSCR lenders and options out there I would compare together.
ProAlpha Capital56 Reviews - 1yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Eyal Goren:
We're looking for lenders who offer DSCR loans in DFW.
What's the best place to look for them? So far we only called banks that popped up on Google maps.
Can look at BP Find A Lender tool: https://www.biggerpockets.com/business/finder/lenders
google search etc.
Also, as some others have commented, DSCR Lenders tend to be national platforms and not really tied to your local market to get the best rates and terms, sharing this article I wrote last year for BP that broke this down too in case it helps!
https://www.biggerpockets.com/blog/dscr-loans-terms-to-knowTypes of Rental Property Lenders
While a lot of these aren’t official and can have some overlap, here are the types of lenders that you will encounter when getting loans for your rental properties:
Non-QM lenders
These are lenders that provide mortgage loans, both for owner-occupied and non-owner-occupied (rental properties), that do not qualify for CFBP mortgage requirements, which generally are defined as loan requirements for purchase by government-sponsored enterprises (GSE). Qualifying mortgage loans typically require stable W-2 employment and DTI ratio requirements, so non-QM lenders primarily serve homeowners who are self-employed or employed as 1099 contractors, non-U.S. citizens, and real estate investors.
DSCR lenders
These are private lenders that lend a specific loan product—DSCR loans—and these lenders only provide loans for investors. These lenders have proprietary guidelines that do not have to confirm to GSE agency guidelines. DSCR lenders strictly serve real estate investors, particularly those investors who are scaling past a couple of properties (and thus struggle to qualify for conventional loans), or those who are pursuing innovative strategies such as the BRRRR method, short-term rentals, and multifamily investing.
Banks
While many real estate investors use the term “bank” to describe all lenders that offer rental property loans, banks should be differentiated as financial institutions that operate under strict licensing and regulatory requirements.
Conventional lenders
These are lenders, including banks and lenders that can also offer non-QM loans, that primarily focus on qualifying mortgages or loans that follow the standardized GSE requirements.
Private lenders
Private lenders should be defined as mortgage lending companies that are not non-banks (and thus not subject to banking regulations and licensing requirements) but also have all the infrastructure of a lending company (including necessary licensing, infrastructure, and capital). Private lenders primarily focus on serving real estate investors and can be much more forward thinking and flexible than heavily regulated and standardized peers (such as banks and conventional lenders).
Private money
The term “private money” should be differentiated from private lenders. Private money generally refers to individuals who invest in real estate through lending personal capital, rather than as a full-fledged lending company.
Hard money lenders
Hard money lenders are typically private lenders that typically lend on higher-risk real estate projects, such as properties that need heavy rehab or for borrowers that have challenged credit. These loans are typically of short duration and have higher interest rates and fees, and aren’t used for stabilized properties.
While these definitions are distinct, there is much overlap between the lending types, where one lender can fall into multiple categories. Common examples of this include private lenders that are both DSCR lenders and hard money lenders, or banks that offer conventional and non-QM mortgage loans.
Harpoon Capital514 Reviews - 1yDerek BrickleyBusiness MemberLender · Ann Arbor, MI · Member since 2021 · 664 posts · 226 votes
Hey Eyal!
I think you're already in the right place for that haha there a ton of us here in the forums and on BP. DSCR is a bit different as you might already know because there is no one set of rules as with conventional so there are a lot more options depending on your situation and investment style. Feel free to reach out if that is something that would be helpful for you!
Gold Star Mortgage Financial Group548 Reviews - Lender · Los Angeles, CA · Member since 2022 · 238 posts · 73 votes1y
@Eyal Goren Lets connect, We provide DSCR loans for Investor 1-4 and commercial properties.
- 1yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Eyal Goren:
We're looking for lenders who offer DSCR loans in DFW.
What's the best place to look for them? So far we only called banks that popped up on Google maps.
Hi Eyal,
You can definitely find several credible DSCR lenders on BiggerPockets. Have you tried the Lenders tab?
LuxePrivate Investments LLC 572 Reviews - Real Estate Agent · St Petersburg, FL · Member since 2019 · 320 posts · 182 votes1y
Is there a specific reason you want a DFW based lender?
- Lender · Ellington, CT · Member since 2024 · 210 posts · 103 votes1y
Hi Eyal,
You should be able to find some additional lenders in bigger pockets itself under the "Lenders" tab. I do offer financing myself in Texas as well if you'd like to see what any rough scenarios may look like.
Also, are you mostly looking for DSCR refi's/ purchases or are you looking to BRRRR in the area too? - Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes1y
Quote from @Eyal Goren:
We're looking for lenders who offer DSCR loans in DFW.
What's the best place to look for them? So far we only called banks that popped up on Google maps.
Hey Eyal,
I sent you a DM too but I do alot of DSCR loans in Texas. Plus we offer 0 points for your first deal with us. Texas is a great place too, the rent to price ratio is fairly strong. Our specs:
- 5.50-7.00% rate
- up to 80% financed
- close in 28 days
- no points for the first loan
Let me know if you want more info
- Investor · Member since 2022 · 49 posts · 17 votes1y
Quote from @Obed Calixte:
Is there a specific reason you want a DFW based lender?
Not necessarily DFW based. But that is willing to invest in DFW.
- Real Estate Agent · St Petersburg, FL · Member since 2019 · 320 posts · 182 votes1y
Quote from @Eyal Goren:
Quote from @Obed Calixte:
Is there a specific reason you want a DFW based lender?
Not necessarily DFW based. But that is willing to invest in DFW.
Heard. That's easy enough.
I have a few that I've personally used and/or worked with for years that I can recommend, if you'd like.
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