DSCR loan on owner occupied multi

Rental Property Investor · New York, NY · Member since 2015 · 57 posts · 16 votes

Hello everyone,

I am looking to buy a small multi (probably duplex or triplex) in Chicago that I will eventually owner occupy. I can get it with a DSCR loan now and would not live in it initially, but would want to eventually move into it 6-12 months down the road. My lender says that shouldn't really be an issue, but just wanted to see if this was too good to be true! Some context, I have 3 other properties in a different city and am currently on 1099 income (so I can't do conventional) for the past 3 months. To avoid non-competes and make twice as much, I wouldn't be getting a W2 job initially in Chicago and would rely on 1099 income. Is there any kind of seasoning or issue I should be aware of with moving into this property eventually?

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Nick BelskyBusiness Member

Residential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votes

@Robert Gonzalez

Most any DSCR loan is going to be chalked full of docs where you agree to NOT occupy the property while under the terms of the loan you are signing docs for. So to say, in a year or so you can move in is 100% mortgage occupancy fraud. Now, if you were to refinance to a consumer loan prior to moving, that would be perfectly legit. Keep in mind, many DSCR loans have prepayment periods, so if you enter into a 3 year ppp, then refi out after 12 months, you will have to cover some penalties at exit to the consumer loan.

Cheers!

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Jaycee GreenePro Member
Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 726 votes
1y
Quote from @Robert Gonzalez:

Hello everyone,
I am looking to buy a small multi (probably duplex or triplex) in Chicago that I will eventually owner occupy. I can get it with a DSCR loan now and would not live in it initially, but would want to eventually move into it 6-12 months down the road. My lender says that shouldn't really be an issue, but just wanted to see if this was too good to be true! Some context, I have 3 other properties in a different city and am currently on 1099 income (so I can't do conventional) for the past 3 months. To avoid non-competes and make twice as much, I wouldn't be getting a W2 job initially in Chicago and would rely on 1099 income. Is there any kind of seasoning or issue I should be aware of with moving into this property eventually?

Hey @Robert Gonzalez. Are you buying the property in your personal name or LLC?
[email protected]
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Nick BelskyBusiness Member
Residential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votes
1y
@Robert Gonzalez

Most any DSCR loan is going to be chalked full of docs where you agree to NOT occupy the property while under the terms of the loan you are signing docs for. So to say, in a year or so you can move in is 100% mortgage occupancy fraud. Now, if you were to refinance to a consumer loan prior to moving, that would be perfectly legit. Keep in mind, many DSCR loans have prepayment periods, so if you enter into a 3 year ppp, then refi out after 12 months, you will have to cover some penalties at exit to the consumer loan.

Cheers!
[email protected]
Belsky Mortgage, LLC519 Reviews
Website View Page
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Paul De Luca
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
1y
@Sam Abazari?
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Sam Abazari
Member since 2023 · 5 posts · 1 vote
1y
You should be fine, and I doubt anyone will care or say anything specially in a DSCR loan. As Nick said, just confirm prepayment penalties for your loan type in case you want to refinance.

In IL, duration of prepayment penalty is limited so the penalty can be higher at times

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Robert Gonzalez
OP
Rental Property Investor · New York, NY · Member since 2015 · 57 posts · 16 votes
1y
I would be buying it most likely in my own name. @Jaycee Greene would there be a difference one way or another with this use?
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Jaycee GreenePro Member
Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 726 votes
1y
Along the lines of the comments from @Nick Belsky, certain lenders can only do loans to LLCs. Sounds like you should go the house hack/FHA route. Good luck!
[email protected]
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Robert Gonzalez
OP
Rental Property Investor · New York, NY · Member since 2015 · 57 posts · 16 votes
1y
Thanks for the advice everyone!
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Jarret Jarvis
Real Estate Agent · Chicago · Member since 2021 · 168 posts · 62 votes
1y
Hey! Your plan sounds feasible, but there are a few things to keep in mind:
- DSCR Loan Flexibility – DSCR (Debt Service Coverage Ratio) loans are designed for investors, meaning there typically aren't occupancy restrictions like conventional loans have. However, some lenders may have guidelines on how soon you can move in, so it's worth double-checking if they have any seasoning requirements before converting to owner-occupied status.
- Refinancing Options – If your goal is to eventually refinance into a conventional loan or an owner-occupied loan, be aware that most lenders require 12+ months of documented 1099 income for qualification. Some may also have a 6-12 month ownership seasoning period before allowing a refinance.
- Loan Terms & Interest Rates – DSCR loans often come with higher rates than conventional or owner-occupied loans. Once you move in, refinancing into a lower-rate owner-occupied loan could be beneficial, but again, your 1099 income history will play a role.
- Lender-Specific Guidelines – Some lenders might have clauses about intent to occupy, so make sure there’s nothing in your loan docs that could create an issue down the road. If you’re upfront about your plan and your lender is on board, you should be good to go.
Sounds like a great strategy! Just make sure to plan for your financing options once you transition to living there. Good luck with the purchase!"
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