DSCR and 10% down Vacation Loans, Can they work together?

[Rachael Lucas]

Hi all,

I'm am trying to build up my education in this area. I am a little confused on these two types of loans and if they can work together in some way, or if it needs to be one or the other. Can you start with a 10% vacation loan and refinance with a DSCR loan later on? Would that be worth the effort?

I appreciate the insight. Thanks!

[Brandon Croucier]

Your going to need to show proof of rent payments and/or short term rental income.

If your buying a primary 2nd home and intending to use it as an investment property I would strongly refrain from that activity; especially if your posting about it in a public forum ;).

Best of luck.

[Jay Hurst]

Quote from @Rachael Lucas:

Hi all,

I'm am trying to build up my education in this area. I am a little confused on these two types of loans and if they can work together in some way, or if it needs to be one or the other. Can you start with a 10% vacation loan and refinance with a DSCR loan later on? Would that be worth the effort?

I appreciate the insight. Thanks!

 @Rachael Lucas    The 10% down second home/Vacation product is a conventional loan. That means you would have to qualify based on your income and your debts. It is a full documentation loan. If you call the property a second home it means two things:

1. You will sign an affidavit at closing that you will use the property yourself for at least 15 days out of a year.

2. and you cannot use rental income to qualify. You CAN rent the property as long as you comply with number 1, but you cannot use rental income to qualify. There is a 15% down investment conventional loan that you can use proposed rental income to qualify.

A DSCR loan does not look at your income, but rather the rental income potential but most will require at least 20% down payment. You can refi a conventional loan into a DSCR if it made sense, but not sure it ever would. But, you cannot combine DSCR with a 10% conventional loan.

[Rachael Lucas]

@Jay Hurst thank you so much for breaking this down. Does the 15% down loan have a name? How would I go about finding more info about it?

[Jay Hurst]

Quote from @Rachael Lucas:

@Jay Hurst thank you so much for breaking this down. Does the 15% down loan have a name? How would I go about finding more info about it?

 It is just a conventional investment loan with a 15% down payment. Any lender should be able to do it as Fannie/Freddie both allow. Do understand that you will have to pay mortgage insurance and the rate will be much higher then if you put down 20% or more. 

https://singlefamily.fanniemae.com/media/20786/display