All Forum Posts by: Tony Severance

@Jabari Seabrook Construction loans used to build investment properties are not very common, unless you are in the hard money space. There are some Non-QM lenders out there that will do these as bridge loans to construct the dwelling, but the max LTV is usually 65% of the ARV (not really a repair, but total value at completion of construction). Rates will also most likely be in the double digits for construction loans. They are also dependent on prior experience at building from the ground up. If you do not have experience doing this in the past, I suggest you go to a hard money lender. Then, when the construction is complete, refinance out of either the non-QM construction loan or the hard money loan into permanent financing, whether that is a DSCR or other type of long term loan.

@Caroline Gerardo 

@Thomas Lebens

Caroline - From the info you are providing, it just sounds like I just have a broader list of DSCR wholesalers at my disposal that offer better terms than those you are using.

Thomas - The bottom line is that you can definitely use a DSCR loan to meet your needs and achieve your investing goals.

Have a GREAT weekend!!

My clients regularly use DSCR cash outs to fund purchases of new properties. It is a very sound strategy for utilizing the equity in your properties to acquire more. However, there are pros and cons that need to be weighed against each other.

@Justin Pumpr  I just DM'd you.

@Justin Pumpr  Most of what you are looking for does exist.  We have the ability to meet most of your checkboxes, except the deferred payment.  Unfortunately, we are not licensed in California.

@Caroline Gerardo 

My response related to reserves was a reply to this statement in your post:

"In addition to down payment you need reserves which is 12 times or 24 multiplied by all you debt. Most lenders will not loan to you if you have no prior mortgage."

Reserve requirements on most of the DSCR loans we provide are equal to either 3 months or 6 months of the monthly PITI of the subject property. And when getting a DSCR Cash out loan, the proceeds from the loan count toward the reserve requirements. They do not care about other properties, other than the borrower's primary residence (which is NOT part of the reserve requirement), nor do they care about other debts the borrower may have.

In addition, we can do a DSCR loan on a purchase of an investment property even if the borrower is a renter. We only need 12 months of housing history and proof of rent payments.

The DSCR market has evolved a great deal over the past couple of years, which has opened up access to more investors.  Also, the loans have become much less restrictive than they were only a couple of years ago.

@Caroline Gerardo You are working with some VERY restrictive DSCR lenders! Leases and deposit checks are NOT required at closing with most DSCR lenders. I do these loans all over the country and have never had those as conditions. Also, many DSCR lenders now only require 3x to 6x the subject property's monthly PITI payment.

@Cameron G. If you plan on living in one of the units, then a DSCR loan is off the table. Those loans are strictly Business purpose and you will be required to sign documents stating that neither you nor an family member will use the property as a primary residence as loan as that loan is in place. for a house hack on a tri- or four-plex, I recommend looking at an FHA loan. You can get into the property for 3.5% down and you only need to live in one of the units for the first year after closing.

@Thomas Lebens I feel the need to clear up some statements above because you need to be careful with these loans. DSCR loans are widely available to first time investors, but they are considered business purpose loans and you will be required to sign documents stating that neither you nor any family member will occupy the property as your or their primary residence as long as that loan is in place. Now, regarding FHA...You can use FHA to buy investment property, but you MUST live in one of the units as your primary residence for at least one year after closing.

@Armando Carrera All good info shared above. Also keep in mind that DSCR loans are highly dependent on the credit scores of the buyers on the note. Any member of the LLC who has a 20% or greater ownership stake in the LLC will need to be on the note as a guarantor. I bring this up so you are aware because the lowest middle credit score of the group is what will be used for qualifying. For example, if you have 3 members with 740 scores and one with a 660, the 660 will be used as the qualifying score. This will negatively impact the terms of the loan such as a higher down payment and a higher interest rate.