How do I know if I am getting a good DSCR loan?

Question

Is there a calculator to use to determine what is the best loan to go with?

It seems like when you get the quote and when you get to the closing table the loan rate changes from the quote to the signing - how can this be avoided?

Andrew Postell · Answer

@Ryan Keeslar you have some good comments above and I wanted to reinforce this message as well.

This is a super important question and it doesn't just apply to lenders.  How do you know that a contractor is any good?  An electrician?  A title company?  Anyone?  Even if they do have 20 years experience...how do you know really? Putting costs on a spreadsheet just tells me who's cheap.  That's not the whole picture.  And while nothing is foolproof the most consistent method of finding good vendors (including lenders) is relying on OTHER real estate investors that have worked with those vendors.  This is why we network with other real estate investors - kind of like what you are doing here!

So, let's try some local real estate meetup groups. Meetup.com is a good resource for those but some of the groups will also post here on Bigger Pockets Marketplace too. Even facebook might have some good local groups for you. And those you don't have to go meet in person. Some of those facebook groups have thousands of members. Ask on those facebook pages who good lenders/vendors are.  Go to the in person meeting and see who people have been using.  The priority is consistent recommendations from active investors.  Oh, eventbrite will also have groups that meet in person. But post locally for this. That’s the best bet.

Chris Seveney · Answer

work with a reputable lender thats the best way. cheapest upfront does not mean the best

Sultan Ali · Answer

Great question, Ryan. A quick check is DSCR = NOI ÷ Debt Service most lenders look for 1.2+. Rates often shift because the initial quote isn’t locked until underwriting, so it helps to ask upfront when the rate is guaranteed and what could change it.

Bridget Brick · Answer

Ryan, lenders lock rates at different times. For example, we as a wholesale lender will give you a rate quote based on the rates the day you submit your deal summary. When it comes to locking we have 2 program optionsProgram 1 locks rates only after we submit the entire deal package to underwriting, about 2 weeks from the initial application (that's how long it takes to get 3rd party docs back like appraisal title and insurance), the rates could have changed during that 2 weeks processProgram 2 has a float-to-close rate, meaning the rate doesn't lock until closing week. The rates don't typically have drastic changes during this time period, but they can go up or down slightly from the day you were quoted.Your lender should have let you know or given you a disclosure.

Scott Chilton · Answer

@Ryan Keeslar, you can use online mortgage calculators to see how different loans and rates affect your payment but they only give estimates. The rate can change from quote to closing because lenders adjust based on the market and your credit check. To avoid surprises ask your lender for a rate lock. A rate lock holds the rate for a set time so it does not change before you close.

Erik Estrada · Answer

Hey Ryan,

This is very typical since they are unregulated. The best way to avoid this is to work with a reputable broker. Someone that has plenty of reviews and has a proven track record of delivering.

You should also ask for a rate sheet. If the lender is honest and transparent about their fees/commissions they will provide one.

Chance House · Answer

Hey Ryan, that sounds like it could be a lender-specific issue. As others have expressed, so long as none of the deal metrics change from quote to closing, the rate should not change. In the event that something like your credit, the property value, or the qualifying rental income changed in underwriting, your LO should have called attention to those changes and explained how they impact your loan. I would push for an explanation rather than accepting any changes blindly.

Ryan Keeslar · Answer

it should be that easy, but weighing points and fees on the dscr loan, and when you get your actual 1st invoice are always shocking. you might get approved for 100k, then the loan comes in at 110k after all of the loan fees and the rate usually is 1/2 a point higher once you get to the closing table - has anyone else experienced this and know the best way to navagate this?

Erik Estrada · Answer

There are some lenders that can disclose if any changes occur during the loan process. Usually only wholesale lenders. They will disclose a loan estimate, and closing disclosure. A lot of the private lenders such as Kiavi, CV3, Lima One, Etc.. Won't..