All Forum Posts by: Brittany Minocchi

Hey Daniel! 

Feel free to reach out to discuss, but for now, here are some things to consider in regards to DSCR loans:

-Typically requires 20%+ down 

-May have a prepayment penalty (important to note if you plan to refinance after a short period of time) 

-Income/employment documentation not required 

-Lenders usually want the ratio to fall somewhere between 0.75-1.5, but other qualifications may affect this (credit score, loan amount, etc)  

-Minimum FICO 640-660 usually needed depending on specific program/lender

-minimum loan amount $75k-$100k depending on lender (likely much less of a factor in TX like it is here in OH) 

Hopefully that helps! 

Lower loan amounts can be tough because 1) loan officers don’t make much on them, so they don’t like to do them and 2) we run into issues with them passing compliance once loan costs are accounted for (compliance = the things we have in place these days to protect buyers and the economy from a 2008 repeat). That’s assuming you’re talking about traditional financing, nonQM is a different story….I have yet to find someone willing to go below $75k for those. I come across low loan amounts often in my market - happy to chat if you’d like to connect. 

Hey Thomas! 

Talk to as many lenders and real estate agents as it takes to find one that you "click" with. Rate is important, but so is being able to get ahold of your lender/agent. Highest performing does not equate to highest level of service in my experience. If they're slow to communicate at the beginning BEFORE you're putting offers on houses, that's a red flag. 

As far as lending goes, I would make sure to have your pre-approval ready before looking at homes for a couple of reasons: many agents won't work with you until you have one (not all, but most), and you'll know exactly what homes to look at based on how much you're approved for. Happy to connect if you'd like to discuss. I don't have any agent connections out that way, but I would start by asking friends and family about their experiences and go from there. Best of luck! 

Not to say that DSCR loans are BAD by any means, they definitely have their place - but as others have mentioned, it's usually better to go conventional for as long as you have that option. Common reasons people choose DSCR are if they want to close in an LLC or they have maxed out their DTI and are no longer eligible for conventional financing. You'll need to make sure the property will debt service, meaning that the projected income from the property will at least cover the projected PITIA. Lenders have different requirements for this, with ratio requirements falling anywhere between 0.75-1.5. For example, a property with a PITIA of $3,000 may need to show an income of $2,250 - $4,500. The required ratio can also vary based on your credit, loan amount, etc. Again, this all varies by lender.

DSCR loans are different in that they don't require income/employment information like conventional loans since they qualify the property moreso than the borrower. However, credit is still an important factor. Another thing to consider is the higher cost to the loan. A DSCR loan isn't regulated the same way as a conventional loan, so be aware of higher fees and prepayment penalties. If your plan is to refinance sooner rather than later, a refi will likely trigger that penalty.

I hope that helps, good luck! 

Hi Guchan, 

Many folks on the forums invest in Cleveland. Canton is another market that I have had success with personally - I also have the goal of cash flow and don’t focus much on appreciation. I’d you’d like to talk more, I’m happy to connect. 

Hi Vishal, 

I don’t know of any credit unions specifically, but there are lenders and LOs out there who will do these types of loans. There isn’t much to be made in terms of commission so many loan officers don’t want to mess with them, and any loan is going to have fees associated with it of course…how high the lender’s fees are and how low the loan amount is will factor into whether or not that loan is compliant and can pass as a qualified mortgage. 

I'm also assuming you're looking for traditional financing. If you're looking for nonQM (like a DSCR loan) you likely won't find a local bank or credit union with those products available, especially sub $100k. Happy to discuss further if you'd like to connect.

Hey Kaden! 

I have a connection that is a professional photographer as well as a licensed agent, his rates (for the photography and real estate commission, should you ever need that) are very reasonable. I’d have to double check to see if he covers Cleveland. Feel free to connect if you’d like his information. 

Quote from @Nick Pries:

Quote from @Doug Smith:

We do them, but the more experience you get, the more aggressive lenders will be. You'll typically need a bit more down...say 25%...but it's doable. 

Sounds good, thanks for letting me know Doug. Let’s say I was to purchase a foreclosure for $60,000. And I were able to put $15,000 down. Do you think I would Abel to get DSCR loan if that property were to have a 1.0 DSCR not including the $15,000 down?

You’ll struggle to find a lender who will allow that low of a loan amount on a DSCR. Most require $100-$125k, but $75k is the lowest I’ve seen. 

Quote from @Amy Mitchell:

Quote from @Brittany Minocchi:

Are you looking at conventional or something like a DSCR loan? Conventional at that amount shouldn't be an issue. $75k is the lowest DSCR/no ratio I've seen.

I would prefer a DSCR loan. Looking for a duplex in Cleveland in the $65-$85 range, seems almost impossible to find a lender on this type of deal.

Gotcha! Yes, considering they usually require at least 20% down these days, a purchase price below $95k minimum is going to be tough to find DSCR financing for. Conventional financing is much more flexible when it comes to the lower loan amounts, but not being able to close in an LLC is a deal-breaker for many. 

Are you looking at conventional or something like a DSCR loan? Conventional at that amount shouldn't be an issue. $75k is the lowest DSCR/no ratio I've seen.