Are there DSCR lenders not needing to sign non-owner occupancy certificate?

Question

Hi - Are there any DSCR lenders who would not require a mandatory signature on non-owner occupancy agreement? The reason I'm asking is in one of the neighborhoods of my property, to get an STR permit from the county, I need an Homestead exemption. For that purpose, I need to provide my driving license at that location to claim it as my primary residence.

So, essentially I am looking for a flexible DSCR lender for a property that I intend to do Airbnb but also claim the Homestead exemption. New to real estate, so not sure if it is a possibility?

Josh Bowser · Answer

Brad - read through most of this thread so far.

Most everyone mentioned to avoid this due to mortgage fraud which is correct.

Additionally, you won't be able to obtain a homestead exemption, LLC ownership, and DSCR loan as these do not go together.

You may want to have your friend look at an owner occupied loan for this (you would want to clear everything through a mortgage broker / loan officer to make sure you're compliant). You and the other members wanting to invest may be able to loan in second position after closing with a dodd frank compliant seal of approval. This is still gray to me so you'd want clear this with an experienced mortgage broker and do not hold back any info.

Cleanest way to do this is probably a higher LTV owner occupied loan and a lease or managment agreement to sublet the property while the owner is occupying the property when they travel. Again - i'd run that past a mortgage broker as well to ensure you're compliant.

Josh Bowser · Answer

Hmm, the only way I think you could get an owner occupied loan without income is if you have a lot of cash or other assets. However, it might be worth exploring buying a small multifamily (2-4 unit) - most of the time, they can use in place leases or projected lease rates to help with the income. Additionally, two years tax returns typically come in to play when the person is self employed or payed through 1099. If the individual is on Salary, they can typically just underwrite that income.If none of this sounds like it will work - you may need to pivot markets or strategies.I think you could likely go the co-living route on a DSCR which has similar return metrics as STRs. Currently, there aren't any permits in ATL to operate a co-living property, but municipalities are pretty open to it excluding for a few. DSCRs right now are between 25%-30% down - most are towards the higher end with rates, rents, and taxes as majority of lenders will underwrite based off long term rents for new investors.If you have any questions on that - shoot me a PM and I'd be happy to chat you through the co-living model and any other strategy related questions. Always down to problem solve!

Erik Estrada · Answer

Is there a reason why you can't qualify for a traditional loan or an alternative NONQM loan like a P&L loan or bank statement loan of some sort?

Brad Smith · Answer

I see, got it. Thanks for the explanation

Robin Simon · Answer

You might find one that will allow it, but what you are describing is mortgage fraud so I would definitely think a little twice here

Brandon Croucier · Answer

No.DSCR loans are investment property loans.

No ifs, ands, or buts about it.

Josh Bowser · Answer

Of course!Not sure on HELOCs now as the lending requirements are a little tighter than they we're a few years ago. They will probably want to look at your personal debt ratios, but it might be worth while to consider that option since you can use the funds at your discretion. Just make sure you're not over leveraging!!!Feel free to buzz me if you want to chat - number is in bio.

Brad Smith · Answer

Those are some excellent suggestions, thank you both @Erik Estrada and @Josh Bowser

I will definitely look into P&L / Bank statement loan as I need to do more research on this given I'm ignorant of this topic.

This actually prompted me to think of other avenues as well - What if I do a first-lien HELOC instead of DSCR? Are there any no-doc HELOC lenders that won't require personal income qualification? If I can find one, that might be the solution to my problem (I think, lol)

But appreciate everyone trying to brainstorm with me and and guiding me in the right direction.

Tanner Lewis · Answer

Yeah if you want a DSCR loan you cannot have a homestead exception at the same time. You would have to forfeit the homestead exemption.

Can you buy it conventionally, get the STR permit, and then refi DSCR? Would this make it work?

Brad Smith · Answer

Yes, thanks... Looks like:

- if one of the part-owners pays rent to the LLC, he will not be considered as the "owner" and therefore, cannot apply for homestead exemption which is a pre-requisite for getting an STR permit.

- And on the other hand, if he doesn't pay rent considering he is a part-owner and applies for Homestead, it will make us ineligible for DSCR loans because DSCR loans don't allow any direct or indirect members to occupy the property.

Would you know if there are any "owner-occupied loans" that don't require a "personal income" eligibility requirement because this member doesn't have high enough income to qualify and may have just one year of income tax returns?

Looks like I'll have to drop my plans on this one unless I find a solution to this problem. :(

Are there DSCR lenders not needing to sign non-owner occupancy certificate?

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