Are there DSCR options that use "value" not "purchase price"?

Question

Hello,

I am looking for DSCR loans that will loan on the value instead of the purchase price on acquisition.

If this is not an option no worries. I just wanted to see if it existed to skip hard money.

Thank you,

Zeke

Erik Estrada · Answer

I think the best way to structure these is to use a HELOC or Cash to purchase the property, then do a cash out refi 90 days afterwards.

There is not a way around this unfortunately

Alex Bekeza · Answer

@Zeke Flores Unfortunately, all DSCR lenders are beholden to the secondary market guidelines on this on a purchase, which would be to use the lower of the purchase price or appraised value when developing "LTV" for the loan. That being said, these value add deals where you recoup a lot of your funds will require that second refi loan. I've purchased a couple this way (basically BRRRRs with no reno) but it required me to close with either cash or private money and then refi.

Jiao Liu · Answer

It exists, just in two steps: at purchase, the loan sizes off the lower of price or appraised value; after the holding period (6–12 months with most lenders, some shorter), a refinance sizes off the appraised value. So the way to skip hard money is: buy on price, stabilize, refinance on value. On a specific property, the price plus your value estimate is enough to compare both routes side by side.

Adam Summerer · Answer

On a purchase, almost every DSCR desk is stuck on the lesser of contract price or appraised value — that’s secondary-market math, not one lender being difficult. The usual way to capture equity above purchase is still cash/HELOC/hard money to close, then a short-seasoned DSCR cash-out once you own it (often in the ~75% LTV class, sometimes with documented rehab). If the only path that lends on ARV at day one is private money, price that bridge all-in (points, interest, exit) against waiting 30–90 days for the term-out. Skipping hard money only works if you bring the cash yourself.

Matthew Bernal · Answer

With most DSCR programs, especially on acquisition, lenders will base the Loan-to-Value (LTV) on the lower of the purchase price or the appraised value. That means even if you agree to a higher purchase price, the lender can only lend up to a percentage (75–80%) of whatever the appraiser says it’s worth.

Stacy Raskin · Answer

Depends on why below market value- is it in ready to rent condition? Either way on a purchase, the lower of the appraised value or purchase price will be used to structure the loan.

Lipa F. · Answer

Question was if borrower find a deal below market value not because it's needs repairs

Stacy Raskin · Answer

Generally lenders on a purchase will use the lesser of the purchase / contract price and the appraised value. It also has to be in ready to rent condition- the appraiser has to mark "as is" on the appraisal form and not "subject to" whatever repairs that need to be done or the repairs will have to be done before the loan will fund. A property that is using a DSCR loan doesn't have to be in perfect or recently rehabbed condition but can't have what the appraiser believes to be health and safety issues or deferred maintenance.

Lipa F. · Answer

I am also wondering why lenders don't do that what's the difference from a refinance that they relying only on apprasil

Are there DSCR options that use "value" not "purchase price"?

Are there DSCR options that use "value" not "purchase price"?

Most Popular Reply

15 Replies