DSCR Not so Simple

[Tekoa Glover]

Is it me or is it the process? Doing my DSCR has been a complete pain in the tail! It has to be just as nerve wrecking as conventional. I'm asking for 50% on one property and 70% on the other. Neither have a mortgage. I have around 700 credit score. No debt. I have been in the process for over 3 weeks. I paid for a appraisal after the lender requested it. Yet I have not received it yet. I thought there was a law that required for me to get a copy of it and also of my credit report that they were using as the basis for the loan. Is this true?

Please help me close my first DSCR deal.

[Nick Belsky]

@Tekoa Glover

DSCR is far easier than conventional. I've done hundreds of them. Sounds like you've had poor expectations on how the process works, poor communication from your lender, and maybe there is more to your file that you are letting us know. Conventional financing is geared and regulated for the owner occupied homeowner and is designed to protect that borrower from poor lending practices. They are in no way shape or form designed to be helpful to the average real estate investor or business owner. They make things way too difficult compared to a simpler, DSCR solution.

The type of lender also plays a large role here. Wholesale lenders are nightmares to work with. They underwrite much like conventional loans and over condition for things that have nothing to do with the subject property and often make a mess of the entire DSCR process. I don't understand why anyone would go through a wholesale lender, personally. Many loan officers who work primarily in the owner occupied space will try to argue that DSCR is more expensive and have higher rates, but that is simply not true in most cases. With wholesale lenders, that is probably very true.

Private money lenders are far superior for DSCR loans. They have streamlined processes and for my clients, we rarely see more than 3-5 conditions from initial underwrite and conditional approval. Their UW fees are the same as conventional lenders if not less in many cases. The rates do tend to be a few basis points higher but are often lower than conventional. To the seasoned investor, a loan rate of 7.25% versus 7.35% is not the priority when there are other factors far more critical to the success of a rental.

DSCR loans are not TRID loans. They do not have to provide you with TRID required documents such as LEs, CDs, or anything like that. Being non-TRID removes all the unnecessary, redundant paperwork and time restrictions. Should they show you an appraisal report? Absolutely they should, but are they required to by law? No. Absolutely not.

Mortgage standard is a tri-merge FICO report, where 98% of all lenders will use the mid-score of the borrower.  If there are multiple borrowers, some will use the higher mid-score of all borrowers, and some with use the lowest mid-score of all the borrowers to base the loan pricing from.  You mention having different scores at different lenders.  That is concerning.  More than likely one is doing a soft pull and not looking at all 3 bureaus.  I've had to pull files numerous times from one lender to another and have credit repulled, but have never seen a different score come up (save if the new pull is 30+ days from the first).  I'd question that for sure.  Lenders are NOT required to give you a copy of your credit report either.  Even if doing a conventional/agency loan, they are not required to and most won't.  The credit provider owns it, not you, even though you may have paid for it.

Cheers!