DSCR Loans - Pennsylvania Co-Owned Properties (One partner abroad)
Investor · Philadelphia, PA · Member since 2016 · 8 posts · 5 votes
DSCR Loans - Pennsylvania Co-Owned Properties (One partner abroad)
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AJ ExnerPro Member
Lender · Springfield, MO · Member since 2023 · 651 posts · 314 votesEvan,
You guys do sound like prime candidates for DSCR style lending as you continue to expand. To answer your first question, many DSCR transactions happen with mobile notaries or I've even closed a few at foreign consulates so that wouldn't be a problem.
I'll try to tack each question one by one, you could leave them in personal names, but it is not preferred and that is both lender and state specific. Some lenders require that it is done in some kind of entity depending one what state the property is in.
Most DSCR lenders would require that insurance, so you would want to confirm as you get started.
The only other thing that pops out to me is to be aware of varying Prepayment Penalty requirements in Pennsylvania. DSCR loans are going to usually have a set period (usually 3-5 years) that they would apply a small financial penalty for refinancing or selling before the 3-5 years is up. Pennsylvania is a little different and a lot of lenders have no-prepayment penalties in PA but you might have to pay some points or see a rate increase because of that. There is also a Transfer Tax that Pennsylvania requires that is always a 'fun' reminder on the final HUD.
Good luck as you guys are working on expanding your portfolio, happy to connect and help if I can!
8 Replies
- 1yAJ ExnerPro MemberLender · Springfield, MO · Member since 2023 · 651 posts · 314 votes
Evan,
You guys do sound like prime candidates for DSCR style lending as you continue to expand. To answer your first question, many DSCR transactions happen with mobile notaries or I've even closed a few at foreign consulates so that wouldn't be a problem.
I'll try to tack each question one by one, you could leave them in personal names, but it is not preferred and that is both lender and state specific. Some lenders require that it is done in some kind of entity depending one what state the property is in.
Most DSCR lenders would require that insurance, so you would want to confirm as you get started.
The only other thing that pops out to me is to be aware of varying Prepayment Penalty requirements in Pennsylvania. DSCR loans are going to usually have a set period (usually 3-5 years) that they would apply a small financial penalty for refinancing or selling before the 3-5 years is up. Pennsylvania is a little different and a lot of lenders have no-prepayment penalties in PA but you might have to pay some points or see a rate increase because of that. There is also a Transfer Tax that Pennsylvania requires that is always a 'fun' reminder on the final HUD.
Good luck as you guys are working on expanding your portfolio, happy to connect and help if I can!
- Lender · Member since 2021 · 495 posts · 130 votes1yEvan,
Quote from @Evan Kline:
Hi All –
Thanks in advance for your feedback. I'm researching DSCR financing options before moving forward within the next ~2-3 months on this. I've read some other posts on the topic, but wanted to start a separate one with a few specific questions.
Background:
- - My partner and I own 2 properties with conventional financing, we have a Tenant in Common agreement between us
- - Financing was only set-up under my partner’s name by mistake
- - We are both US citizens; however I live abroad (receive a foreign salary) and file US taxes
- - Good credit scores
- - Both properties cash flow with PITIA ratios of ~ 1.2
We'd like to re-finance so that we are both on the financing and it seems that a DSCR loan would be a good option given that I live outside of the US.
Questions:
- - Could we close a DSCR loan virtually or would we both need to be physically present for closing? (Virtual closing is preferred)
- - Would we need to have an LLC to move these properties under a DSCR loan, or could my partner and I leave the properties in our names?
- - Would a DSCR loan for Pennsylvania properties trigger title insurance? If the above is yes and we would need to pay for title insurance anyways, then I assume it would make sense to move these under an LLC
- - Are you aware of any watch-outs or other considerations we should factor-into our decision?
Thanks again,
Evan
Almost always you will need to close on U.S. soil (embassy for example) or go through the Apostille process from my experiences. Usually RON transactions are discouraged by DSCR lenders.
For title insurance, the lender would likely require a lender title policy.
The other PA specific item to consider is transfer taxes and when applicable.
Cheers! - 1yKo KashiwagiPro MemberLender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
Hi Evan,
Some DSCR lenders will require it to be signed in US, but not all - I've closed DSCR with clients in foreign countries. Typically they need to sign at the US embassy. You could navigate all of this if your partner lives in the US, and you make him the sole guarantor with title vested under the LLC (you'll need to get a LLC for this structure).
LLC vesting is not required as there are programs that will allow personal name vesting, but it will slightly limit your options.
I would watch out to confirm important info by double checking in writing, checking their reviews and making sure everything is documented. For example whether you can sign in the US or not - I've seen so many clients get told one thing by a lender and get overpromised recently.
- Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes1y
Is there any tangible benefit to this refi other than just putting yourself on the mortgage and note? As in, are you reducing the rate, pulling cash from the equity, etc? If not, I dont really see any reason to spend $5k+ and go through all of this headache just to put yourself on the documents.
- Investor · Philadelphia, PA · Member since 2016 · 8 posts · 5 votes1y
Hi All - Thanks for your valuable feedback, there are lots of good takeaways for us to think about and it's encouraging to hear that it's certainly possible to perform this while abroad (albeit most likely a bit more complicated). One of the key points for us to think further about is the LLC vs. personal designation and what lending options are available for each so that we can make an informed decision.
In addition, I've appreciated the connects with several of you and will send DMs.
@Patrick Roberts - I'll DM you separately on this to share some background and discuss the merits of what we're trying to do.
Thanks again, Evan
- 1yMatthew CrivelliBusiness MemberLender · MA · Member since 2021 · 1k+ posts · 1k+ votes
You need to sign in the U.S.
When taking a mortgage, the lender will always requires title insurance.
In most cases, you will need to refinance the properties into the LLC.
Escrow reserves will almost always be collected at closing (Taxes and insurance will be included in the monthly payment)
Be prepared for higher fees over a traditional bank loan. DSCR loans have trade offs. Qualifying factors are more lax, less documents are necessary, closing times are quicker. BUT, rates and loan fees are generally higher. (specifically the rates are higher in PA due to prepayment penalty laws)
Fast, easy to obtain / qualify, and cheap. These 3 things do not exists together in the lending world. It's a give and take.
Freedom Capital Funding, LLC523 Reviews - 1yJoyce Ann MagallanesBusiness MemberLender · NY · Member since 2025 · 494 posts · 21 votes
Hi Evan,
Typically, mortgage closings require a wet signature, which can be done through title or mobile notaries, or in your case, through the embassy. Depending on the bank, the closing can be in a personal name or an entity name. Title insurance is always required for closings with financing, as this is usually a lender's requirement.
In Pennsylvania, make sure the property is held in fee simple.
For a DSCR refinance with a new borrower, ensure that the seasoning ownership condition is not required if your name is not currently on the deed.
Venture Estate Group LLC525 Reviews - 1yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Evan Kline:
Hi All –
Thanks in advance for your feedback. I'm researching DSCR financing options before moving forward within the next ~2-3 months on this. I've read some other posts on the topic, but wanted to start a separate one with a few specific questions.
Background:
- - My partner and I own 2 properties with conventional financing, we have a Tenant in Common agreement between us
- - Financing was only set-up under my partner’s name by mistake
- - We are both US citizens; however I live abroad (receive a foreign salary) and file US taxes
- - Good credit scores
- - Both properties cash flow with PITIA ratios of ~ 1.2
We'd like to re-finance so that we are both on the financing and it seems that a DSCR loan would be a good option given that I live outside of the US.
Questions:
- - Could we close a DSCR loan virtually or would we both need to be physically present for closing? (Virtual closing is preferred)
- - Would we need to have an LLC to move these properties under a DSCR loan, or could my partner and I leave the properties in our names?
- - Would a DSCR loan for Pennsylvania properties trigger title insurance? If the above is yes and we would need to pay for title insurance anyways, then I assume it would make sense to move these under an LLC
- - Are you aware of any watch-outs or other considerations we should factor-into our decision?
Thanks again,
EvanHey Evan,
Hope all is well.
1. You would need to sign in person. If you live abroad you can sign in person at a U.S. embassy. Depending on if you close in an LLC you can structure it where your partner owns 51% of the entity and he would be the main PG of the loan. If this is the case, then the lender would likely only request signing authority from you (this can be e-signed) and then your partner, who lives in the states, can sign loan docs in person.
2. This depends on the lender. Some lenders will require vesting in an LLC others will not require it.
3. Yes you pay for title insurance on DSCR refinances.
4. Be aware that DSCR loans have pre-payment penalties. If the goal is to keep these for more than 5 years, the loan could be highly beneficial as the rates and terms are very close to a conventional mortgage. If however you plan on selling or refinancing in less than 5 years, the loan may end up costing you more since reducing the PPP will result in higher fees and/or rate. PA is one of those trickier states where some lenders may or may not allow a PPP.
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