HM lenders, depending on the lender, want to make sure you are using your cash and not borrowing money that isn't collateralized (secured by real assets). 

While there isn’t an exact, commonly agreed-upon definition out there, here is a handy definition for this specific loan product:DSCR loans are mortgage loans secured by residential real estate turnkey properties, strictly used for a business purpose and underwritten primarily based on the property.Important note: DSCR loans refer to the specific loan type, and the “DSCR ratio” (debt service coverage ratio) is a metric used for underwriting and evaluating these loans (and other loans), but the metric and ratio itself are distinct things versus what is referred to as “DSCR loans.”Some key things to note in the definition:DSCR loans are secured loans (meaning that there is collateral that the lender can take if the borrower doesn’t pay back the debt).

The lender always requires it for the same reason --- what's the point of using real property as collateral if you aren't sure that the Title is secure.Hope this helps. 

I have an investor that wants to get a 50k loan using his free and clear condo in dallas TX as collateral.

Gap funding usually requires collateral and or pledging of other unrelated assets. i don't like leveraging those items and are typically a oxymoron because if you have those assets and dont have cash you essentially get into a leverage position you dont need to be in.having a asset that can be pledged for a gap loan without cash to me is kind of an oxymoron in itself just my opinion. 

If you want to do a lease option, you likely won't get compensated for your payments so it's safer to build the collateral and just buy it when you get qualified.

The loan wasoriginated in 2021.The investors, Ridge Capital Investors, paid only $33m for the property in December 2019, less than 2 years before a $43m loan was extended against a $63m collateral.

Based on the type of loan your collateralization will be 10/15/35/40 percentB.  

Instead, you might ask a portfolio lender if they'd forego the down payment if you give them a second lien position on the other property as additional collateral.

Here is how most work:•Rates: 9% to 13% (Most Deals are 11-12%)Terms: up to 36 Months (Most Deals are 6-12 months)Fees: 2-4 points(%) of loan amount paid at closing (Most Deals are 3 points(%))Minimum Loan Amount: $50,000 (For loans less than $250,000 $2,500 minimum fee)Max Loan: 65%-70% of After Repair Value(ARV) 100% Rehab Financing Available (Require 20% of purchase price down payment or cross-collateral)Closing Timeframe: 48 Hours - 3 Weeks (Most Deals are 2 Weeks)NO PRIMARY RESIDENCES, NON-OWNER OCCUPIED ONLY, BUSINESS AND COMMERCIAL USE ONLY.