DSCR Rates in the Midwest

[Salah Dajani]

Hi all, I'm a new investor looking to acquire my first property. I've been looking at some multifamily properties in the 1.5-2m range and am planning on putting down about 800k. The DSCR loan quotes I've gotten have a 9% interest rate. That seems a bit high to me, what do you guys think?

[Doug Smith]

There are a lot of factors that are going to impact the rates on a DSCR loan. Those rates track with the 10-year US Treasury, which has been falling a bit this week. There are several levers that you can push or pull to make the rate move. A 5/6 ARM will have a lower rate than a 30-Year Fixed Deal. A 5-year prepayment penalty will carry a lower rate than a 1-year or even, with some programs, no prepayment penalty. The more you put down, the better the rate. Nine is a bit on the high side, but we don't know the rest of the terms to judge the deal. If you have a 30 year fixed rate with no prepayment penalty and a high-LTV, that is going to be a much higher rate than a 5/6 ARM with a longer prepayment penalty and a low LTV. Perhaps you can ask about different options and maybe they have multiple DSCR lenders to broker deals through.