DSCR Loan Question

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DSCR Loan Question

Kamal Martin
Member since 2023 · 15 posts · 2 votes

Hi,

Does anyone know of any House Hacking friendly DSCR lenders?

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Patrick Roberts
Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
1y

This doesnt really exist. House hacking is a primary residence strategy, meaning the property is owner occupied. DSCR loans by definition cannot be used for owner occupancy because they would have to comply with Dodd-Frank rules regarding Ability to Repay, which is exactly what they remove with the DSCR component. DSCR's are commercial loans and every program I have ever seen prohibits owner occupancy - these are only for properties that are exclusively investment properties.

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  • Bryan Stengel
    Real Estate Agent · Long Island · Member since 2018 · 88 posts · 38 votes
    1y

    Hi Kamal, the type of strategy is applicable to a primary residence, which for a first time investor might be the most affordable option to start off with. DSCR loans tend to have higher interest rates and are usually only provided for solely rental properties. It might be better to seek out an FHA loan or conventional loan for purchasing this residential property.

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  • Jeffrey BlackmanPro Member
    Lender · Chicago, IL · Member since 2017 · 107 posts · 34 votes
    1y

    Hi @Kamal Martin, I financed a DSCR loan for an investor in Jacksonville on December 27th. Living rent free is not an issue on DSCR. My client had just moved to the state, is living rent free with relatives and is not yet employed.

    I've also done conventional investor loans for people living rent free. I'd be happy to talk you through the pros and cons of each option.

    I'm a licensed mortgage broker and also a real estate investor and am happy to share my experiences as both.

    Jeff (847) 805-8442 

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  • Deborah Wodell
    Lender · Sanford, NC · Member since 2024 · 348 posts · 116 votes
    1y

    Hi Kamal,

    It seems like you're navigating a common situation when it comes to house hacking and DSCR loans. As you've likely heard, DSCR loans are strictly for non-owner-occupied properties. So, if you're planning to live in any part of the property, these loans wouldn't be an option.

    However, if you're considering a multi-unit property (like a duplex, triplex, or fourplex), there's an interesting workaround. While DSCR loans won't cover owner occupancy, they will allow you to use rental income from the non-owner-occupied units to qualify for the loan. You just can't live in the units you intend to finance with a DSCR loan.

    If house hacking is a priority, I’d recommend considering other financing options, like conventional loans, which can support owner-occupancy in the right circumstances.

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1y
    Quote from @Kamal Martin:
    Quote from @Patrick Roberts:
    Quote from @Kamal Martin:
    Quote from @Patrick Roberts:

    This doesnt really exist. House hacking is a primary residence strategy, meaning the property is owner occupied. DSCR loans by definition cannot be used for owner occupancy because they would have to comply with Dodd-Frank rules regarding Ability to Repay, which is exactly what they remove with the DSCR component. DSCR's are commercial loans and every program I have ever seen prohibits owner occupancy - these are only for properties that are exclusively investment properties.


    Well, I should rephrase my question. I have a primary residence, but it isn't in my name. From my research that is a problem. So, are there any DSCR loans that won't check to see if I have a primary residence in my name?


    Im not really clear on what youre asking. It sounds like youre saying that youre looking for a DSCR lender who doesnt require you to own a primary residence because youre currently renting and do not own a primary home. If that's the case, then yes, I know there are a few lenders out there who will lend when youre a renter with a verified lease and not an owner. If that's not what youre asking, then Im not sure what to say.

    Keep in mind that the DSCR lender rules around owning a home are meant to be a check on people using DSCR loans to buy a primary residence rather than a rental. I would expect that programs that allow you to not own a home will have an experience requirement, meaning that you have recent experience as a landlord with properties that you own.

     I live with My family. I do not pay rent. When I get the loan, I will not live in the property. I have no experience as a landlord/property manager. Do you know any lenders that work with the South Florida Area?


    Yes you can still get a DSCR loan, but the underwriter will need to verify your current residence. Do you have a cellphone bill, ID, credit card statement, utility bill statement or any kind of official documentation to support your current residence?

    It may also help to have the property leased out (although not required) but definitely will show you do not intend on living on the property you are taking a DSCR loan on.

    [email protected]818-269-7983
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  • Bryan MaddexBusiness Member
    Lender · Charlotte, NC · Member since 2015 · 159 posts · 76 votes
    1y

    Hey @Kamal Martin

    There are plenty of DSCR lenders who will lend to you if you do not own a primary home. There are also some lenders that will allow you to have NO investor experience. Most lenders will one one or the other, some will want both. But there are lenders for new investors who do not own a primary home.

    Let me know if you are still looking for a lender, I work with 220+ lenders and have several that will work fine in your situation!

    Bello Mortgage powered by Coast2Coast Mortgage
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