Which company to use for DSCR loan?

Question

Hi. I am from Los Angeles, CA. I have not worked with anyone who does DSCR loans. Do you guys have any recommendations? There are a lot of companies when I search in google and not really sure who to go with. Thank you.

Simmy Ahluwalia · Answer

@Elvin Luccon - work with a broker like myself.  We originate DSCR loans on behalf of 10-20 different dscr lenders.

Devin Peterson · Answer

Hi Elvin, pickpocket has the best options for DSCR lenders and brokers available nationwide. There are tons of qualified individuals who can help you shop products and their select lenders playbook utilizing the find a lender tab at the top of the page more often than not, an experienced broker who can help you shop a married of options, across-the-board of every lender in the nation is going to be able to provide some great value to you in order to save time on shopping. Good luck!

Stacy Raskin · Answer

It's helpful to work with a mortgage broker that has experience working with DSCR loans and ideally specializes in working with investors. Working with mortgage brokers, gives you access to multiple DSCR lenders who have different guidelines depending on the lender.

In case helpful, here's more info on 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 < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23

If 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 discuss further.

Which company to use for DSCR loan?

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