Dscr 100 k turn key sfh rental home how much cash to close

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Dscr 100 k turn key sfh rental home how much cash to close

Gp G.
Investor · Atlanta · Member since 2019 · 537 posts · 91 votes

Hi,
To close dscr 100k turn key sfh rental home how much I have to save up including all down payments, taxes, closing costs, points, fees etc etc.
My middle score around 681. Has some credit card debt with debt to income more than 50% currently. Is debt to income relevant for dscr? I have some cash now. Should I clear credit card debt? Should I keep for down payments?
How much is ideal down payment percentage? I heard some lenders do 15% down payment but more interest and points at that stage no need to do deal as numbers will not pencil out but rather feed lenders and contractors etc and take negative cash flow for years in this declining market
Please advise

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  • Ernesto Garcia
    Lender · Long Beach, CA · Member since 2019 · 67 posts · 15 votes
    18h

    Lender here- even with a strong DSCR the sub 720 fico might affect the overall leverage. 20% down is more realistic.

    With that being said you're probably looking at 20-25% DP and most lenders will require that you have 3-6 months of interest reserves post closing.

    You would need to account for cost of appraisal, lender fees (legal, processing, etc) , escrow, title insurance, taxes , and property insurance.

    In terms of cash on hand a safe number to show would be about 30-35% of that Purchase Price.

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  • Marc Del Priore
    Lender · Philadelphia, PA · Member since 2024 · 12 posts · 4 votes
    7h

    Hi Gp — good news first: for a true DSCR loan your personal debt-to-income ratio is generally not what the lender underwrites — they size the loan off the property's rent versus the full payment (principal, interest, taxes, and insurance), usually looking for about a 1.20-1.25 ratio or better. On a $100K turnkey rental, a realistic cash-to-close plan is 20-25% down ($20-25K) plus closing costs, points, prepaid taxes/insurance, and several months of reserves — 15% down programs exist, but as you flagged, the rate and points usually get steep enough that the numbers stop penciling. Paying down credit cards can still help indirectly by lifting your score and freeing up reserves, but I would not drain the down-payment cash to do it. I am Marc with Royal Partners — if you want, DM me the expected rent and taxes/insurance on the place you are looking at and I will give you straight numbers on what cash-to-close would actually look like.

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  • James Loffredo
    Lender · Dallas, TX · Member since 2024 · 10 posts · 2 votes
    3h

    GP, DTI doesn't matter on a DSCR loan. It's sized on the house, rent vs the full payment.

    The number that matters is your 681. On the programs I work with, 680 to 699 gets you 75% on a purchase. Drop under 680 and it’s 65%. Hit 720 and it’s 80%. So don’t drain your down payment on the cards, but paying them down is the cheapest way to move your score. And don’t open anything new before closing.

    Rough cash to close on a $100K house at 75%:

    • $25,000 down

    • $1,500 origination (2 points on a $75K loan)

    • $600 appraisal

    • About $1,600 in other closing costs

    • A few months of taxes and insurance into escrow

    • 3 to 6 months of payments in the bank as reserves after closing

    Call it $29K plus escrow and reserves.

    You’re right on the 15% down programs. If it only works with expensive leverage, it doesn’t work. There is also programs with lower credit thresholds that cost more as well.

    I run a lender, so weigh that.

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  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2h

    Not really, DTI isnt relevant for a DSCR loan - its underwritten primarily based on the property (the rent vs the PITIA) rather than personal income or tax returns, so your 50%+ DTI wont come into play. What DOES matter is credit score and reserves, and 681 is fine with plenty of DSCR Lenders but you'd likely see better pricing at 700+ (a lot of lenders price in 20 point buckets, 680/700/720 etc), so paying down the cards to drop utilization could be worth it if it bumps you over 700 before you lock.

    On a $100k purchase at 25% down rough numbers would be $25k down plus something like $5-7k in closing costs (points, lender fees, appraisal, title, prepaid taxes/insurance) plus reserves, which is generally 3-6 months of PITIA depending on the lender, so ballpark $33-37k all in. 20% down is pretty common too and yeah theres 15% down options out there but you're right that the pricing gets heavier the higher you go on leverage. One thing I would say is watch the loan amount, a lot of DSCR Lenders have minimums around $75k-$100k and small loans tend to price worse, and since you mentioned "declining market" some lenders also knock 5% off the max LTV if the appraisal checks "Declining" so 15-20% down might not even be on the table in that case.

    Whats the rent looking like on the one you're eyeing?

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