DSCR loans: what I wish I knew before my first one
I've done DSCR loans across 236 doors, and here's what nobody told me before my first one:
1. The ratio matters more than the rate. I buy single-family under $100K, rehab to an ARV of $180K–$265K, and refi at 70–80% LTV. If the rent covers the payment at 1.25x, the loan gets done. My Section 8 rents run $1,395–$1,950 on 3BR+ houses — that's why the DSCR math works for my box.
2. Seasoning is the surprise cost. Most DSCR lenders want 6 months of ownership before the refi. I build my holding costs around that from day one. The flip mindset of "refinance in 60 days" dies here.
3. They don't care about your W-2, but they will stress-test the property. A weak rent number or a soft appraisal kills the deal the same way bad credit kills a conventional loan.
4. Your appraisal starts at purchase. I only underwrite off SOLD comps — never Zillow estimates. If my comp set is wrong, the whole refi math breaks and I'm stuck on expensive money longer than planned.
5. Read the prepayment penalty before you sign. I hold long-term so it bites me less, but if you plan to sell or refi in 2 years, a 5-year prepay clause is a five-figure surprise.
The real lesson: DSCR isn't a strategy. Buy right, force the value with rehab, rent it, and the financing follows.
What's the one thing you wish you'd known before YOUR first DSCR loan?