DSCR Loans have better rates than Conventional?

Question

The other day I received a call from my lender stating she was doing side by side comparisons of a conventional to DSCR loan.  For the first time I have heard the DSCR loan had a better rate with lower points than the conventional loan.

For reference the DSCR loan Rate: 8.5% 2 origination points

Conventional Rate: 9.5% 3 origination points

Is anyone else seeing this where they are at?  This was used to compared on a client of mine so its using the same info for both just an FYI

Zach Wain · Answer

Bank statement loans have particular good when compared to conventional 2nd home and rental deals.  It depends on the scenario.  Also yes, DSCR with long Prepayment penalties is something to be wary of.  I am not a fan of anything over a 1-2 yr PPP.  3-5 yr PPP seem crazy to me.

Robin Simon · Answer

There is always going to be a lot of nuance to comparing "rates" since there are a lot of factors when comparing rates for a specific scenario so comparing can sometimes be apples to oranges.  There are certainly cases where DSCR Loans might have a lower rate - particularly if you load up on prepayment penalties

Tony Severance · Answer

@Joshua Ricker  The 9.5% rate is VERY high for a conventional loan right now.  However, we do not know the amount being put down, credit scores, etc.  There are probably better options out there that should be explored.  Especially since conventional does not have PPP.

@Zach Edelman  I have seen DSCR lenders that are OK with sellers carrying back a second as long as the CLTV meets their guidelines.

Zach Edelman · Answer

The seller is carrying a second position on a DSCR loan? Usually DSCR lenders require first and sole lien position?

Gordon Cuffe · Answer

@Joshua Ricker I am a mortgage broker in Rocklin CA and I am quoting people at 7% to 7.25% for non owner conventional mortgages as long as they have a 640 plus credit score. I am surprised you got quoted that high of a rate for a conventional loan.

Chris Webb · Answer

@Erik Estrada the DSCR is only 50% of the loan, seller is carrying 40%.

Erik Estrada · Answer

10% down on a DSCR?

Joshua Ricker · Answer

I added some more details that I should have in the first post.  This was a compare on a client of mine so the same info was used for both sides.  At that point it seems a DSCR is a no brainer.

DSCR Loans have better rates than Conventional?

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