The Disadvantge of DSCR Loans
DSCR loans typically have prepayment penalties ranging from 1 year to 5 years.
Usually this means that if you were to sell, refinance or pay down a large portion of the loan during the prepayment penalty period you could be subject to a penalty (usually a small % of the loan (ie. 1 to 3% of the balance)).
The catch is that usually the longer the prepayment penalty, the lower the interest rate.
This means that a loan with a 5 year prepayment penalty will typically have a lower interest rate than a loan with a 1 year prepayment penalty.
If you plan to hold your property long-term this may not be an issue but if you think you may sell in 4 years you may want to consider a loan with a shorter prepayment penalty.
The Advantages of DSCR Loans
✅ DSCR loans do NOT require any verification of your personal income or employment so whether you make $1,000,000 a year or don't have a job, it does not affect your ability to qualify ror a DSCR loan
✅ Because DSCR loans are not "full doc" loans they are usually quicker to do
✅ A property does NOT need to be rented before you can qualify for a DSCR loan
✅ You can put the property in your LLC (conventional loans do not allow htis)
✅ Most DSCR loans are 30 year fixed loans (just like conventional financing)
✅ You can do a "no seasoning" DSCR cashout loan and use the new value of the property. This means if you bought a property today and fixed it up, tomorrow you could do a DSCR cashout loan based on the NEW appraised value. Traditional financing typically requires 12 months to pass before you can use the new value of the property to qualify for a mortgage.
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The Investor Starter Kit Includes:
✅Credit Boost Blueprint -- simple tips to start improving your credit right now
✅DSCR Blueprint -- one-page cheat sheet to help you get approved
✅DSCR Calculator -- find out fast if a property cashflows
✅Fix & Flip Checklist -- step-by-step guide to help you get approved
✅Fix & Flip Calculator -- run numbers on a property to see if it's likely to qualify
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Consumer Complaint Info
Texas Complaint/Recovery Fund
Figure: 7 TAC §80.200(b)