All Forum Posts by: Alex Bekeza

Thanks for sharing this @Adam Macias.  I look forward to continuing a great relationship with the BP Find A Lender team. 

Most DSCR (Debt Service Coverage Ratio) lenders do not use the same credit models that banks and conforming lenders use for traditional mortgages. Instead:

• Tri-Merge Mortgage Credit Report: The majority of DSCR lenders will still pull a full mortgage tri-merge report (Experian, Equifax, and TransUnion) through the credit bureaus. This ensures they have all tradelines, inquiries, and public records.

• FICO® Mortgage Scores (Classic Models): Unlike consumer apps (Credit Karma, Experian app, etc.) that often show VantageScore, DSCR lenders rely on the classic FICO mortgage scoring models:

  • Equifax Beacon® 5.0

  • Experian®/Fair Isaac Risk Model v2

  • TransUnion® FICO Risk Score 04

• Middle Score Method: Just like agency loans, DSCR lenders typically use the middle score of the three bureaus for qualification. 

No DSCR loans require PMI.....

I'm leaning towards there must be a misunderstanding somewhere because it seems too crazy. Care to post a copy of the CD/HUD here? $18k in closing costs simply doesn't make sense so we need to see how that's itemized. At a glance, I don't know any DSCR lender that would even allow more than like 4-5 pts on the HUD which would still be a lot less than $18k.

I can tell you that on this small $132k loan our total lender fees (orig + underwriting, etc) would not exceed $4,855.  Any other closing costs would be third party related like title/escrow fees (any co. you like) and prepaids for property taxes & insurance.

@Kelly Schroeder

It really comes down to your strategy. If you're a BRRRR investor looking to scale a rental portfolio and plan on using financing on the purchase (hard/private money) and looking to refi into long term fixed rate financing using relatively short seasoning you can throw Conventional out the window assuming you're shooting for max cash out based on the new appraised value.

The main perks of DSCR loans as opposed to conventional are:

Short Seasoning - 90 day or even zero seasoning options available (to use new appraised value for cash out)

Entity Vesting - LLC and Corp Vesting allowed or sometimes even required

Scalability - No limit on the # of financed properties owned

Simplicity - A DSCR loan is a much simpler underwrite especially if you have complex personal income to document trying to go conventional.

I personally own 22 units (about $1.9M value grossing over $17k in monthly rent) at the moment all of which were BRRRRs and I simply could not have achieved this velocity (4 years) without the use of DSCR loans.

@Robert Johnson We go down to $75,000 on DSCR. I'm in CA but I also own a triplex in Abilene Texas! Let me know if you want to chat through this one today.

People do BRRRRs in C/D neighborhoods successfully, but it’s usually a cash flow play, not appreciation. If your goal is to recycle cash quickly, they can work but expect higher management/turnover risk.

Personally I've done 10 BRRRRs in what I'd call a C area but the low barrier to entry, high rent to price ratio, reliable lending, and working with the right property management team has turned it into a pretty scalable process for me. 

I'm thrilled about a new tool we've launched that allows borrowers to get their own real time pricing for DSCR loans with a few simple clicks 24 hours a day 7 days a week. This portal is not only great for getting the submission process started with us but also an awesome tool to play with when pre-underwriting deals. We're going to continue to add features every single week to enhance the user experience and make getting a DSCR loan as easy as possible without loosing the white glove service touch which earned us so many 5 star reviews. Link to our google reviews

Here's the link to this new tool - www.investorpropertyloan.com/DSCR

While our company does still offer other unique products, this tool will be unique to long term rental units. So if you have a short term rental, flip, or other unique scenario we can still totally handle that but it would fall outside of this new calculator.

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@Ned Carey I see what you're saying but I think it's also worth mentioning that it's not like the majority of DSCR loans close below a 1.25 DSCR (while of course some do). The greatest demand for these loans is in markets with relatively high rent to price ratios, rents increase over time while the rate is fixed for 30 years, etc. The actual default rates on these sort of speak for themselves and that's why there's still more capital chasing this type of debt then there are borrowers to even give it to.

It's also not as if the majority of these loans are going to people with ZERO personal income even though we're not calculating DTI. Quite the opposite, I'd say our average borrower is a self employed business owner who has developed a significant income and then uses it to get into real estate investing. 

You are absolutely right about a tight DSCR only using RENT/PITI is a negative cash flow deal. To your point, it's great when savvy borrowers opt to take less than their maximum allowable LTV to lower their debt service and make it a stronger cash flowing deal as opposed to always maxing things out.