What can DSCR loans do now in 2023 that they couldn’t do last year?
DSCR loans have been around for a long time. In 2023, the real estate climate has experienced a few changes, and knowing how they relate to DSCR loans can help you get ahead of the game.
Changing Landscape for DSCR Loans
While DSCR loans used to be for single-family or 1-4 unit properties, in 2023 we’re seeing DSCR loans explode into multi-family, blanket loans for larger portfolios, and multi-units.
With new options available, you need to know what to look for while remembering that all DSCR companies have specific niches. It’s important to find a lender who understands the particulars of your project.
The Power of Shopping Around
While this isn’t new, shopping around is very important in 2023. With a growing number of lenders loosening their requirements, finding a lender that specializes in projects like yours can make a big difference.
If your project is unique or you’re dissatisfied with the rate you’re offered, reach out to mortgage lenders or brokers who have the power to offer something different.
Exploring DSCR Loan Possibilities in 2023
As a reminder, DSCR loan requirements are based exclusively on income from the property in question (not personal or business income or taxes).
This has allowed for some exciting new developments in the DSCR loan market:
Expanded Property Types:
DSCR loans now cover a wider range of properties, including large portfolios of more than $50 million, blanket loans for mixed-use properties, and larger multi-family units.
The range of these options provide greater flexibility when shopping around for DSCR lenders and exploring their requirements.
It’s now possible to find DSCR loan options for first time investors and investors who don’t own a primary residence.
This opens up DSCR loan opportunities for investors who were previously more limited in their abilities to purchase investment properties.
Rural Properties and Condotels:
If you’re looking to purchase rural properties, condotels, or other vacation rentals by owner (VRBO), you can now find DSCR loans for properties up to 20 acres.
Funding Considerations for DSCR Loans in 2023
Products change constantly, so it’s always a good idea to talk to professionals in your area, particularly when it comes to how DSCR lenders look at funding, financing limits, and credit:
- Gift Funding Flexibility: Lenders are trending towards having looser rules around gift money. Previously, it was better to have seasoned money in your account. Now, so long as the money is there for closing and it comes from your account, you’re usually set. That said, if you have any questions about gift funding, talk to your particular lender.
- Property Ownership Limits: A few lenders are also lifting their limits on how many properties you can finance. Previously, the majority of companies limited investors to 5-10 properties. Now, it’s fairly easy to find lenders without those restrictions.
- Credit Influence: Although DSCR loans don’t look at your income, they still look at credit. The better the credit score, the better the loan to value ratio. Also, the higher the DSCR calculation (rent ÷ income), the better the terms.
- Standard Interest Only Options: As always, there are interest only options. Depending on your project and the current market, these aren’t always the most helpful, but they are available.
How to Find Your DSCR Loan in 2023
With the recent shifts in the 2023 DSCR loan market, you should be able to find a loan option that works for you so long as your project has the potential to draw income.
We’re more than happy to help you shop around to find the best rates.
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