Refinancing Advice needed for First Time Investor and DSCR Lender Recommendations

Houston, Texas
Rehabbing & House Flipping
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Refinancing Advice needed for First Time Investor and DSCR Lender Recommendations

Melissa Faraias
Member since 2023 · 65 posts · 28 votes

Hello BP community,

I am close to finishing the rehab on my first rental property and looking to refinance soon. Does anyone have any good DSCR lender recommendations? The property is located in Houston.

A lender that I spoke with gave me two options for refinancing; the first involves refinancing immediately after the rehab is complete and renting it out to a tenant. In that case I could get upto 80% LTV of purchase price plus rehab costs. The second option involves waiting for the 6 month seasoning period and then getting upto 75% LTV of the ARV. Normally I would wait the 6 months, but the lender anticipates interest rates to go up significantly by then. Looking for some advice on what would be the best route to take. Thanks in advance for all the valuable advice.

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Bill J FayPro Member
Lender · San Diego · Member since 2023 · 216 posts · 209 votes
2y

I would recommend the "Find a Lender" tab on BP! They will have a list of national lenders or there's a drop down with Texas specific investment lenders. 

You can find DSCR Lenders that can cash out refinance with your loan amount limited to your full cost basis (purchase price + renovation) with no seasoning. Additional limit will depend on seasoning and credit score. 

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  • Bill J FayPro Member
    Lender · San Diego · Member since 2023 · 216 posts · 209 votes
    2y

    I would recommend the "Find a Lender" tab on BP! They will have a list of national lenders or there's a drop down with Texas specific investment lenders. 

    You can find DSCR Lenders that can cash out refinance with your loan amount limited to your full cost basis (purchase price + renovation) with no seasoning. Additional limit will depend on seasoning and credit score. 

    2Reply
  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    2y

    Hey @Melissa Faraias! Most lenders have a 6 month seasoning requirement, but there are some out there who will allow you to use the appraised value sooner than that. Most are around the 70-75% LTV mark, but there are lenders going up to 80% if you/the property meet certain criteria (you'll notice a difference in rate and terms going that high, though).

    As far as your lender anticipating rates to go up significantly....this sounds like a scare tactic. None of us have a crystal ball and it's impossible to say for sure whether rates will go up or down.

    If you'd like to discuss further, I'm happy to chat. Feel free to connect! 

    [email protected]330-354-6590
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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 673 votes
    2y
    Quote from @Melissa Faraias:

    Hello BP community,

    I am close to finishing the rehab on my first rental property and looking to refinance soon. Does anyone have any good DSCR lender recommendations? The property is located in Houston.

    A lender that I spoke with gave me two options for refinancing; the first involves refinancing immediately after the rehab is complete and renting it out to a tenant. In that case I could get upto 80% LTV of purchase price plus rehab costs. The second option involves waiting for the 6 month seasoning period and then getting upto 75% LTV of the ARV. Normally I would wait the 6 months, but the lender anticipates interest rates to go up significantly by then. Looking for some advice on what would be the best route to take. Thanks in advance for all the valuable advice.


     Definitely check out the build your team tab to find BP preferred lender lists. Also, its all really arbitrary suggestions on market insights over the coming months. We've seen a decent rebound the last week or so but no broker or lender has a crystal ball for the next six months.

    You can typically get 75% LTV cash out with a DSCR loan. Some lenders require 6 months, others 90 days. Each has its own overlays and guidelines in place.

    [email protected]860-538-3672
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    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Melissa Faraias:

    Hello BP community,

    I am close to finishing the rehab on my first rental property and looking to refinance soon. Does anyone have any good DSCR lender recommendations? The property is located in Houston.

    A lender that I spoke with gave me two options for refinancing; the first involves refinancing immediately after the rehab is complete and renting it out to a tenant. In that case I could get upto 80% LTV of purchase price plus rehab costs. The second option involves waiting for the 6 month seasoning period and then getting upto 75% LTV of the ARV. Normally I would wait the 6 months, but the lender anticipates interest rates to go up significantly by then. Looking for some advice on what would be the best route to take. Thanks in advance for all the valuable advice.


     Hey Melissa, 

    If you can show you put $10k in rehab cost, FICO is above 700, the property debt services, and you own a primary or can show you rent your primary for at least 12 months, you can qualify for a cash out refinance DSCR loan with no seasoning required AND use the new appraised value.

    [email protected]818-269-7983
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  • Ray WilliamsBusiness Member
    Lender · Denver, CO · Member since 2017 · 162 posts · 73 votes
    2y

    Great insight above. I will layer in the chatter about rates. Historically over the last 8 years b/t Nov-Feb rates have come down 6/8 years. Though for any of us to say THIS is what will happen to rates is inaccurate. At the end of the day, if you can do it now, does that serve you best longer-term than waiting? Answering that question and with the right lender partner is the way to go. 

    1Reply
  • Brandon BeardtPro Member
    Lender · La Crescenta, CA · Member since 2021 · 261 posts · 157 votes
    2y
    Quote from @Melissa Faraias:

    Hello BP community,

    I am close to finishing the rehab on my first rental property and looking to refinance soon. Does anyone have any good DSCR lender recommendations? The property is located in Houston.

    A lender that I spoke with gave me two options for refinancing; the first involves refinancing immediately after the rehab is complete and renting it out to a tenant. In that case I could get upto 80% LTV of purchase price plus rehab costs. The second option involves waiting for the 6 month seasoning period and then getting upto 75% LTV of the ARV. Normally I would wait the 6 months, but the lender anticipates interest rates to go up significantly by then. Looking for some advice on what would be the best route to take. Thanks in advance for all the valuable advice.

    Hi Melissa, congrats on almost completing your BRRRR project! All of the BRRRR investors that we work with usually cash out refinance once they've been on Title for 3 months with the DSCR program. This way, they're able to get max leverage (75% LTV) based on the new appraised value of the property and can repeat the process without having to wait the additional 3 months to start. My advice to you right now would be to talk to different lenders/brokers and see what sort of programs & terms they offer for this particular deal. It seems you're at the point now where you have some time since the rehab isn't fully finished. Use this time to connect with lenders and do your research/due diligence on them (read reviews, testimonials, etc). Once you're ready to start the process, reach back out to those you had a good connection/conversation with and get quotes.
    [email protected]818-726-2418
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  • Zane Kampfer
    Lender · Austin, TX · Member since 2022 · 18 posts · 12 votes
    2y

    It sounds like you're in a good position to potentially maximize your financing options for your rental property in Houston. Both options have their pros and cons, so it ultimately depends on your specific circumstances and preferences. Here are some considerations for each option:

    Option 1: Refinance immediately after rehab and renting it out to a tenant

    Pros:

    1. Higher LTV (up to 80% of purchase price plus rehab costs) could potentially provide you with more cash to invest in other opportunities.
    2. You can lock in current interest rates, which might be lower than what they could be in the future.

    Cons:

    1. It might be more challenging to find a tenant quickly, and you'll need to consider potential vacancy periods.
    2. If the property doesn't appraise as expected or if there are unforeseen issues, it could affect your refinancing terms.

    Option 2: Wait for the 6-month seasoning period and get up to 75% LTV of the ARV

    Pros:

    1. Waiting for the seasoning period allows you to potentially access a higher LTV based on the after-repair value, which could result in more favorable financing terms.
    2. You'll have more time to ensure the property is in optimal condition and potentially command higher rents.

    Cons:

    1. You might miss out on current interest rates if they do increase significantly.
    2. There's a waiting period, during which you won't be able to access the potential refinancing benefits.

    Ultimately, you'll need to weigh these pros and cons based on your individual circumstances and risk tolerance. If you're particularly concerned about rising interest rates, it might be worth considering option 1. However, if you're confident in the potential appreciation and rental income of the property, waiting for the seasoning period could provide a higher LTV.

    0Reply
  • Melissa Faraias
    OP
    Member since 2023 · 65 posts · 28 votes
    2y

    Thank you to everybody who took the time to respond to my post and offer your valuable advice. I will be reaching out to some of you shortly. 

    0Reply
  • Stephanie P.Pro Member
    Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
    2y
    Quote from @Melissa Faraias:

    Hello BP community,

    I am close to finishing the rehab on my first rental property and looking to refinance soon. Does anyone have any good DSCR lender recommendations? The property is located in Houston.

    A lender that I spoke with gave me two options for refinancing; the first involves refinancing immediately after the rehab is complete and renting it out to a tenant. In that case I could get upto 80% LTV of purchase price plus rehab costs. The second option involves waiting for the 6 month seasoning period and then getting upto 75% LTV of the ARV. Normally I would wait the 6 months, but the lender anticipates interest rates to go up significantly by then. Looking for some advice on what would be the best route to take. Thanks in advance for all the valuable advice.


     If your lender tells you interest rates will go up significantly in the next 6 months, run.  No one knows what interest rates are going to do in 6 months; there is a whole industry of people that speculate about rates, but no one knows. 

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