@Ruben Ramirez, You can get a DSCR loan without having gotten one before. There are lenders that will work with first time investors. Some will want you to have owned a property. Others will work with renters who are looking to buy their first property as an investment property.
Regarding your questions, there are investors making money in this market. I work with some of them. Requirements for a DSCR loan is a down payment and a credit score. More on that below. Regarding your question, DSCR lenders are funding millions of loans a month right now- it's not hard at all to find a DSCR lender.
There are lenders that will go down to 620 for your middle mortgage FICO credit score with more money down and lenders who will do 15% down for a single family with 720 and above with a 1.2 DSCR ratio (more on that below). For a 1 one ratio, they will do 20% down.
DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth. They don't consider borrower income.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. Market rents from the appraisal and/or the actual rents need to cover the mortgage payment, property insurance, taxes and HOA (if applicable).
4. Prepayment penalties range from 1-5 years and you get to decide the length of the term. The longer the term, the less of an impact on the rate.I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350 Insurance = $100 Association Dues = $50
Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100 Association Dues = $25
Total PITIA = $1875
Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23
DSCR loans can be used for purchases and for cash out refinances. Most lenders allow you to vest individually or as an LLC.
