All Forum Posts by: Stacy Raskin

DSCR loans have 30 year fixed mortgage options and the rates are investment property rates. They typically start at about one percent higher than current owner occupied rates if you have strong credit and at least 20% down so 6.8 vs 7.8% for example. They don't use personal income and don't consider your debt to income ratio. They are ideal for investors who are looking to maximize their net worth since they use only your credit score and rents to qualify the loan.

Also, some lenders will use market rents provided by the appraiser so you can buy an unoccupied property and still get a DSCR loan. Also, DSCR loans usually have a minimum loan amount of $100-150K depending on the lenders I work with.

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 generally takes a hit. 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 = $2200

Rent = $2000

DSCR = 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 = $250Insurance = $100

Association Dues = $25

Total PITIA = $1875

Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

Lender terms and fees vary widely. 

@Tyler Youtzy, if you don't have consistent income right now, best to add a strong co-borrower. If you were doing an investment property, I would recommend a DSCR loan as no personal income is needed but if a primary, based on what you mentioned, a co-borrower is the way to go.

Depending on the state, I can do a HELOC on an investment property as I work with lenders that do both HELOCs and fixed 2nd mortgages on investment properties. Right now, I'm doing those in CA and FL. Looking to expand into more states.

@Chris Trafton, I work with lenders that do condotel investment property mortgages. I'll send you a message as well to get more information. 

@Emanuel Johnson, I work with different bridge or hard money lenders. Depending on the details of the amount, length of the term, there are different options.

@Maryanne Kichline, it's weighing whether getting a 2nd at around an 11% interest rate makes sense, doing a conventional refinance or a DSCR refinance.

Conventional has a bit of a better rate than a DSCR loan but you would have to be able to carry the new mortgage against your income.

2nds have higher rates than conventional or DSCR loans and they use your income to qualify.

If debt to income (DTI) is an issue, DSCR is the way to go since the loan will be underwritten based on the rents and your credit score. Your income isn't a factor.

Do you think income will be an issue for the loan?

@Adriel Paradise, since there different loan program options, what price ranges are you buying in for properties, what's usually your average budget for rehab and what states are you doing flips in? 

@Tricia Holway, I work with lenders that do HELOCs and 2nd mortgages on investment properties. I'll send you a message as well. 

DSCR lenders will either take a 100% of your net income on your income on your Schedule E or your tax return (so this is where they will consider your property expenses) or they will take your current lease with a 75% vacancy rate. So (for easy math), if your current lease is $1000, the lender will take $750 as cash flow.

Also, some lenders will use market rents provided by the appraiser so you can buy an unoccupied property and still get a DSCR loan. DSCR loans usually have a minimum loan amount of $100-150K depending on the lenders I work with.

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. 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 = $2200

Rent = $2000

DSCR = 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 = $250Insurance = $100

Association Dues = $25

Total PITIA = $1875

Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

Lender terms and fees vary widely. As a mortgage broker, I shop my clients' loan to get them the best possible loan and the least fees while helping them to reach their investment goals. 

I work with lenders that do HELOCs and fixed 2nd mortgages on investment properties.