DSCR Loan Vs. Conventional Loan

[Jennifer Roberts]

As a newer investor I'm wondering why I would want to max out my DTI before applying for a DSCR loan? Are there any pros or cons to this? Or why would a lender recommend this? Just for reference, I have a good amount of cash to use as leverage with DSCR and qualify for much less using conventional and we may be looking to move and use a conventional loan for our next personal property within 3-5 years.

[Matthew Crivelli]

DSCR Loans are always more expensive, the rate and closing costs. Currently rates are 6% - 7% across the industry and will go higher. You will also see rates on investment properties go up at banks in the 6% range fairly quickly as well.

The benefits to DSCR? No DTI, taxes, or employment checks so the loan is easier to qualify for and the commercial mortgage doesn't show up on your credit and background reports. The loan will not affect your DTI and there is no cap on how many notes you can have outstanding at one time. Also HIGHER LEVERAGE for purchases and refinances. Last but not least, close times! They will be inside 30 days in most cases.

The main qualifiers,

1. Property has to cash flow 

2. Can't be rural (need to have sale & market rent comps)

3. Credit score matters (700 + for high leverage)

4. You must hold the property under an LLC or CORP

5. Must be rented (or willing to get it rented soon)