Do you need to have any REO to apply for a DSCR Loan?

[Matteo Girlando]

Hello gents!

I'm starting my journey into investing in real estate. My idea, together with a partner, is to use the DSCR loans to buy different properties in the midwest.
Talking with a lender he told me its not possible to apply for a DSCR if I don’t already own a piece of real estate..is it true? I’m not finding anything about it, I tough the good credit and good rental mortgage ratio was enough.

that is answer: 

Matteo,

I have one last question. I noticed you do not currently have any REO (real estate owned). For a DSCR loan you must own at least one property (primary residence is OK). If you do not own any REO, unfortunately I will not have a lender that will write a DSCR loan. That is a requirement with the DSCR program regardless of the lender.

If this is true I will probably start buying the first one with a normal conventional and using the DSCR after.

Thanks!

[Yvonne Gallegos]

Quote from @Matteo Girlando:

Hello gents!

I'm starting my journey into investing in real estate. My idea, together with a partner, is to use the DSCR loans to buy different properties in the midwest.
Talking with a lender he told me its not possible to apply for a DSCR if I don’t already own a piece of real estate..is it true? I’m not finding anything about it, I tough the good credit and good rental mortgage ratio was enough.

that is answer: 

Matteo,

I have one last question. I noticed you do not currently have any REO (real estate owned). For a DSCR loan you must own at least one property (primary residence is OK). If you do not own any REO, unfortunately I will not have a lender that will write a DSCR loan. That is a requirement with the DSCR program regardless of the lender.

If this is true I will probably start buying the first one with a normal conventional and using the DSCR after.

Thanks!

Hi Matteo 
yes this is true! Or most lenders will say the gap from the last property you sold should be no more than 5 months!  Because technically you are always supposed to have a primary residence for dscr.  If you’ve never owned then conventional absolutely makes the most sense since interest rate and down payment would be lower! 

[Robin Simon]

Some DSCR lenders will require experience, but there are a few that do not

[Matteo Girlando]

Quote from @Yvonne Gallegos:

Quote from @Matteo Girlando:

Hello gents!

I'm starting my journey into investing in real estate. My idea, together with a partner, is to use the DSCR loans to buy different properties in the midwest.
Talking with a lender he told me its not possible to apply for a DSCR if I don’t already own a piece of real estate..is it true? I’m not finding anything about it, I tough the good credit and good rental mortgage ratio was enough.

that is answer: 

Matteo,

I have one last question. I noticed you do not currently have any REO (real estate owned). For a DSCR loan you must own at least one property (primary residence is OK). If you do not own any REO, unfortunately I will not have a lender that will write a DSCR loan. That is a requirement with the DSCR program regardless of the lender.

If this is true I will probably start buying the first one with a normal conventional and using the DSCR after.

Thanks!

Hi Matteo 
yes this is true! Or most lenders will say the gap from the last property you sold should be no more than 5 months!  Because technically you are always supposed to have a primary residence for dscr.  If you’ve never owned then conventional absolutely makes the most sense since interest rate and down payment would be lower! 

Thanks! We will probably start with conventional, but it feel easier with dscr loans if we ara aiming on 10+ properties in a short period

[Matthew Crivelli]

@Matteo Girlando

We have a DSCR product available to first time investors. What do you need for a Non-QM DSCR loan? (Rental property)

1. Subject property that can cashflow above the minimum debt service coverage ratio. In our case this is 1.1

2. Subject property needs to be located in a non-rural area and must be close to recent comparable sales 

3. Currently you need GOOD CREDIT (or have a partner who does) - 720+ mid-score is ideal

4. The borrower / partner should have assets to show  (25% down payment + closing costs+ reserves)

5. You will likely need an LLC that will be used to hold the subject property. 

If you can check these boxes off you would be able to start buying long term rentals with having owned zero real-estate prior to the first transaction. 

[Yvonne Gallegos]

@Matteo Girlando definitely once you get into multiple properties it’s the way to go. Where do you plan to acquire most of your investment properties? 

[Matteo Girlando]

Quote from @Matthew Crivelli:

@Matteo Girlando

We have a DSCR product available to first time investors. What do you need for a Non-QM DSCR loan? (Rental property)

1. Subject property that can cashflow above the minimum debt service coverage ratio. In our case this is 1.1

2. Subject property needs to be located in a non-rural area and must be close to recent comparable sales 

3. Currently you need GOOD CREDIT (or have a partner who does) - 720+ mid-score is ideal

4. The borrower / partner should have assets to show  (25% down payment + closing costs+ reserves)

5. You will likely need an LLC that will be used to hold the subject property. 

If you can check these boxes off you would be able to start buying long term rentals with having owned zero real-estate prior to the first transaction. 

Hey Matthew,

thanks for your answer! We check all this boxes. 
in which area do you operate? Right now we are looking at Detroit Area

[Matteo Girlando]

Quote from @Yvonne Gallegos:

@Matteo Girlando definitely once you get into multiple properties it’s the way to go. Where do you plan to acquire most of your investment properties? 

Hi @Yvonne Gallegos,

Right now Detroit Area, we are already in contact with agents there are helping us. We are in the process of getting the preapproval and then we proceed. After that, in Cleveland/Columbus and Indianapolis areas.

at this point it seems the easier way its getting the first couple of deals under conventional and then going with dscr.

its just seems weird to me I need to own a primary residence in order to have dscr( I live in LA where prices are crazy), and wondering now how people that dont live in US how they invest in the states.

[Matthew Crivelli]

Quote from @Matteo Girlando:

Quote from @Matthew Crivelli:

@Matteo Girlando

We have a DSCR product available to first time investors. What do you need for a Non-QM DSCR loan? (Rental property)

1. Subject property that can cashflow above the minimum debt service coverage ratio. In our case this is 1.1

2. Subject property needs to be located in a non-rural area and must be close to recent comparable sales 

3. Currently you need GOOD CREDIT (or have a partner who does) - 720+ mid-score is ideal

4. The borrower / partner should have assets to show  (25% down payment + closing costs+ reserves)

5. You will likely need an LLC that will be used to hold the subject property. 

If you can check these boxes off you would be able to start buying long term rentals with having owned zero real-estate prior to the first transaction. 

Hey Matthew,

thanks for your answer! We check all this boxes. 
in which area do you operate? Right now we are looking at Detroit Area

We lend nationwide. Please keep in mind, there is a minimum as-is value and loan amount. The property has to be in livable condition as well. 
Feel free to reach-out, I would be happy to chat with you. 

[Yvonne Gallegos]

@Matteo Girlando ok great! If you ever consider the southwest Florida market let me know! Lots of opportunities 

[Matteo Girlando]

Quote from @Matthew Crivelli:

Quote from @Matteo Girlando:

Quote from @Matthew Crivelli:

@Matteo Girlando

We have a DSCR product available to first time investors. What do you need for a Non-QM DSCR loan? (Rental property)

1. Subject property that can cashflow above the minimum debt service coverage ratio. In our case this is 1.1

2. Subject property needs to be located in a non-rural area and must be close to recent comparable sales 

3. Currently you need GOOD CREDIT (or have a partner who does) - 720+ mid-score is ideal

4. The borrower / partner should have assets to show  (25% down payment + closing costs+ reserves)

5. You will likely need an LLC that will be used to hold the subject property. 

If you can check these boxes off you would be able to start buying long term rentals with having owned zero real-estate prior to the first transaction. 

Hey Matthew,

thanks for your answer! We check all this boxes. 
in which area do you operate? Right now we are looking at Detroit Area

We lend nationwide. Please keep in mind, there is a minimum as-is value and loan amount. The property has to be in livable condition as well. 
Feel free to reach-out, I would be happy to chat with you. 

Yes please!
I’ll send an email shortly cc my business partner as well. We do have already an LLC

[Stephanie P.]

Quote from @Yvonne Gallegos:

Quote from @Matteo Girlando:

Hello gents!

I'm starting my journey into investing in real estate. My idea, together with a partner, is to use the DSCR loans to buy different properties in the midwest.
Talking with a lender he told me its not possible to apply for a DSCR if I don’t already own a piece of real estate..is it true? I’m not finding anything about it, I tough the good credit and good rental mortgage ratio was enough.

that is answer: 

Matteo,

I have one last question. I noticed you do not currently have any REO (real estate owned). For a DSCR loan you must own at least one property (primary residence is OK). If you do not own any REO, unfortunately I will not have a lender that will write a DSCR loan. That is a requirement with the DSCR program regardless of the lender.

If this is true I will probably start buying the first one with a normal conventional and using the DSCR after.

Thanks!

Hi Matteo 
yes this is true! Or most lenders will say the gap from the last property you sold should be no more than 5 months!  Because technically you are always supposed to have a primary residence for dscr.  If you’ve never owned then conventional absolutely makes the most sense since interest rate and down payment would be lower! 

 Yvonne,

There are quite a few DSCR lenders that don't require the borrower to own their primary residence and some don't even require a rental or mortgage history. You can literally live in your Mom's basement.

Also, for units, you can get higher ltv on DSCR than conventional. Most DSCR lenders will go to 80% on 1-4 units and conventional caps you at 70 for cash out and 75 for limited cash out or purchase.https://singlefamily.fanniemae....

All the best

Stephanie

[Joel Rosa]

Quote from @Matthew Crivelli:

@Matteo Girlando

We have a DSCR product available to first time investors. What do you need for a Non-QM DSCR loan? (Rental property)

1. Subject property that can cashflow above the minimum debt service coverage ratio. In our case this is 1.1

2. Subject property needs to be located in a non-rural area and must be close to recent comparable sales 

3. Currently you need GOOD CREDIT (or have a partner who does) - 720+ mid-score is ideal

4. The borrower / partner should have assets to show  (25% down payment + closing costs+ reserves)

5. You will likely need an LLC that will be used to hold the subject property. 

If you can check these boxes off you would be able to start buying long term rentals with having owned zero real-estate prior to the first transaction. 

Hi Mathew,


I am a newbie trying to get my first properties as well and I also currently check all of those boxes. Have you done any deals lending in the Ohio or Pennsylvania markets? 

[Matthew Crivelli]

Quote from @Joel Rosa:

Quote from @Matthew Crivelli:

@Matteo Girlando

We have a DSCR product available to first time investors. What do you need for a Non-QM DSCR loan? (Rental property)

1. Subject property that can cashflow above the minimum debt service coverage ratio. In our case this is 1.1

2. Subject property needs to be located in a non-rural area and must be close to recent comparable sales 

3. Currently you need GOOD CREDIT (or have a partner who does) - 720+ mid-score is ideal

4. The borrower / partner should have assets to show  (25% down payment + closing costs+ reserves)

5. You will likely need an LLC that will be used to hold the subject property. 

If you can check these boxes off you would be able to start buying long term rentals with having owned zero real-estate prior to the first transaction. 

Hi Mathew,


I am a newbie trying to get my first properties as well and I also currently check all of those boxes. Have you done any deals lending in the Ohio or Pennsylvania markets? 

@Joel Rosa Sorry for the delay in response. We lend in both markets. Feel free to give me a call! 

[Yvonne Gallegos]

Hi Stephanie 

Thank you for the info! I had a deal call through because of that in Georgia and also the lenders I work with in Florida also all require a primary residence. Do you do loans in Florida or Georgia? Be good for me to know in the future 

[Jay Thomas]

For those with limited experience in the DSCR space, this can be a great opportunity to get started. There are several lenders that don't require prior experience and will work with borrowers to ensure their projects are successful. This is a great way for inexperienced borrowers to gain knowledge and skills while also getting access to financing. It's a win-win for everyone involved!

Additionally, borrowers should be prepared to work closely with their lenders and provide the necessary information and documents in order to get approved. With proper preparation, inexperienced borrowers can successfully secure DSCR financing from a lender that doesn't require experience. This will open up new opportunities for them and potentially lead to more successful projects in the future!

[Stephanie P.]

Quote from @Yvonne Gallegos:

Hi Stephanie 

Thank you for the info! I had a deal call through because of that in Georgia and also the lenders I work with in Florida also all require a primary residence. Do you do loans in Florida or Georgia? Be good for me to know in the future 

We do both Florida and Georgia. In Florida, most of our lenders require the borrower to close as an LLC, but in Georgia, they can go to either LLC or an individual. Would love to work with you!

Stephanie

[Lee Nugent]

Quote from @Matteo Girlando:

Hello gents!

I'm starting my journey into investing in real estate. My idea, together with a partner, is to use the DSCR loans to buy different properties in the midwest.
Talking with a lender he told me its not possible to apply for a DSCR if I don’t already own a piece of real estate..is it true? I’m not finding anything about it, I tough the good credit and good rental mortgage ratio was enough.

that is answer: 

Matteo,

I have one last question. I noticed you do not currently have any REO (real estate owned). For a DSCR loan you must own at least one property (primary residence is OK). If you do not own any REO, unfortunately I will not have a lender that will write a DSCR loan. That is a requirement with the DSCR program regardless of the lender.

If this is true I will probably start buying the first one with a normal conventional and using the DSCR after.

Thanks!

 @Matteo Girlando one thing to consider is find private money, make a cash purchase and let it season if your lender has any title seasoning requirements. Some do require a year, however there are local lenders that provide dscr products without the seasoning; you just have to check around. 

All the best to ya man! 

[Kevin Woodard]

I know this thread has received it's fair share of great answers. As for REO, the answer like most real estate investing questions is, ‘it depends.'

For example we are able to do deals without previous real estate owned, but we just added that feature within the last 3 weeks. 

I’d be more than happy to talk to you on your specific deals as it does vary from state to state.

@Matteo Girlando

@Yvonne Gallegos

[Jonathan S.]

Quote from @Matthew Crivelli:

@Matteo Girlando

We have a DSCR product available to first time investors. What do you need for a Non-QM DSCR loan? (Rental property)

1. Subject property that can cashflow above the minimum debt service coverage ratio. In our case this is 1.1

2. Subject property needs to be located in a non-rural area and must be close to recent comparable sales 

3. Currently you need GOOD CREDIT (or have a partner who does) - 720+ mid-score is ideal

4. The borrower / partner should have assets to show  (25% down payment + closing costs+ reserves)

5. You will likely need an LLC that will be used to hold the subject property. 

If you can check these boxes off you would be able to start buying long term rentals with having owned zero real-estate prior to the first transaction. 

How long do you have to have owned property before you can apply for a DSCR loan? Is there a limit or can I apply for a DSCR loan as soon as I've bought my first property?

[Jonathan S.]

Quote from @Kevin Woodard:

I know this thread has received it's fair share of great answers. As for REO, the answer like most real estate investing questions is, ‘it depends.'

For example we are able to do deals without previous real estate owned, but we just added that feature within the last 3 weeks. 

I’d be more than happy to talk to you on your specific deals as it does vary from state to state.

@Matteo Girlando

@Yvonne Gallegos

How long do you have to have owned property before you can apply for a DSCR loan? Is there a limit or can I apply for a DSCR loan as soon as I've bought my first property? I live in NY.

[Tarik Turner]

Quote from @Jonathan S.:

Quote from @Kevin Woodard:

I know this thread has received it's fair share of great answers. As for REO, the answer like most real estate investing questions is, ‘it depends.'

For example we are able to do deals without previous real estate owned, but we just added that feature within the last 3 weeks. 

I’d be more than happy to talk to you on your specific deals as it does vary from state to state.

@Matteo Girlando

@Yvonne Gallegos

How long do you have to have owned property before you can apply for a DSCR loan? Is there a limit or can I apply for a DSCR loan as soon as I've bought my first property? I live in NY.

You can purchase a property using a DSCR mortgage or use the delayed financing method to refinance immediately after the purchase. (On a delayed purchase loan, the loan would be based on the purchase price and not as is value)

If you are looking at a refinance where you want to base the loan on the as is value most DSCR lenders have a 3 to 6 month seasoning period.

[Jonathan S.]

Quote from @Tarik Turner:

Quote from @Jonathan S.:

Quote from @Kevin Woodard:

I know this thread has received it's fair share of great answers. As for REO, the answer like most real estate investing questions is, ‘it depends.'

For example we are able to do deals without previous real estate owned, but we just added that feature within the last 3 weeks. 

I’d be more than happy to talk to you on your specific deals as it does vary from state to state.

@Matteo Girlando

@Yvonne Gallegos

How long do you have to have owned property before you can apply for a DSCR loan? Is there a limit or can I apply for a DSCR loan as soon as I've bought my first property? I live in NY.

You can purchase a property using a DSCR mortgage or use the delayed financing method to refinance immediately after the purchase. (On a delayed purchase loan, the loan would be based on the purchase price and not as is value)

If you are looking at a refinance where you want to base the loan on the as is value most DSCR lenders have a 3 to 6 month seasoning period.

 Thanks!