Does anyone have experience using DSCR Loans as a cash out refinance option?

[Richard Ruedas]

Looking for general information or advice on using DSCR Loans as a cash out refinancing. If you have used this option before or are a lender who has helped clients with this type of product please comment.

I am looking at using this type of loan for BRRRR projects and would like to see if it's a strategy that could work.

[Andrew Postell]

@Richard Ruedas thanks for the post. And yes, DSCR loans are the lifeblood of many investors. Even if you can use a standard Fannie/Freddie loan...you can only use them 10 times. So, you'll have to use DSCR loans anyway if you become that successful (and here's wishing that you will!). I have used DSCR loans on several of my own properties and they are significantly easier to get...but the rate and terms are different. Here's what I mean:

Generally speaking there are 2 main types of loans for investors: “Conventional” and “Portfolio”

Conventional - I'll define these as loans that come from Fannie Mae and Freddie Mac (if you recognize those names). These loans are all 30 year fixed rate loans. They have the lowest rates we can find and since they are 30 year fixed...they allow us to cash flow better...which helps us qualify for other loans later. The draw back to these loans is that they are more paperwork heavy than the other "portfolio" types of loans....but if you have ever received a loan on your primary home, it's likely that you will go through the same type of paperwork here with conventional lending. Fannie/Freddie money = Fannie/Freddie rules. NOT the bank's own money.  

Portfolio - I'll define these loans as loans that come from the bank's own "portfolio" of money. Sometimes referred to as "commercial" loans. These loans are a lot more flexible than "conventional" loans. Bank's money = Bank's rules. If they like you, then maybe they will lend to you. But since there is a limit to how much money the bank has access to....their rate will be higher...and usually a DSCR loan will come with some type of prepayment penalty. These loans are usually .5% higher than the Fannie/Freddie money. It's easier to get, but slightly more expense.

You can certainly use DSCR money on your 1st or 20th BRRRR property home.