How much is DSCR actually swinging your refi terms right now?

Question

Lenders seem to be tightening DSCR requirements lately. Anyone seeing real differences in refinance terms between a 1.0x and a 1.25x+ deal in this rate environment?

Mark Updegraff · Answer

I look at DSCR before I care what the lender’s minimum is.

If a property is sitting around 1.0x, the bigger problem for me isn’t whether somebody will make the loan. It’s that there’s almost no margin for an insurance increase, tax change, vacancy or unexpected repair.

On multifamily I generally want to see something around 1.20x or better in my own underwriting even if a lender is willing to stretch further.

I’d also model the refinance at several loan amounts instead of just asking “what’s my max proceeds?” Sometimes leaving some equity in the deal and preserving breathing room produces a much healthier investment than squeezing every possible dollar out at refi.

Erik Estrada · Answer

The rate difference between 1.00 & 1.25 DSCR on a residential 1-4 unit property are usually minimal from what I have seen on my end. The huge rate differences are usually on the credit score and pre-payment penalty period.

If the ratio is tight, you can also pivot to other income doc types (bank statement, P&L, full-doc) depending on the program you will usually get a better rate and higher LTVs

Noah Wright · Answer

I shop this stuff across a lot of wholesale lenders and the 1.0 vs 1.25 rate spread itself is usually small on 1-4 unit resi. What moves your terms more is how each shop calculates the ratio. Some use market rent from the appraiser, some use in-place leases, and the vacancy and expense factors they apply are all over the place. The same property can come out 1.05 at one lender and 1.3 at another. Get the actual math from each one before comparing pricing.

Stacy Raskin · Answer

There's options for DSCR with a 1.0 ratio that has favorable investor terms- just as favorable as 1.25+. Loan programs vary depending on the lender. Options vary depending on the number of units. Generally DSCR loan programs break down differently between 1-4 units, 5-8 units and 9+ units but this varies based on the lender. These loan programs will have different underwriting guidelines.

A mortgage broker that is experienced and specializes in DSCR loans can help with a real estate investor in finding the best options as an experienced mortgage broker has access to DSCR lenders that don't advertise directly to the public. Happy to connect to discuss further.

How much is DSCR actually swinging your refi terms right now?

How much is DSCR actually swinging your refi terms right now?

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