🏗️ 5-9 Unit DSCR Loans | Mortgage Rates LIVE

Scale your real estate portfolio with confidence! Close out December with us as we go LIVE to review Daily Mortgage Rates and focus on 5-9 Unit DSCR Loans.

We’ll discuss how debt service coverage ratio (DSCR) loans work, key considerations for investors, and how these loans can help finance small multi-family properties efficiently

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Our team of licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access thousands of mortgage programs using Alternative Income Documentation such as Bank Statement Mortgages...

Transcript

So we'll check out the general market today, here in a moment, and then we will go into a deep dive into our topic for today, which is going to be our small, commercial five-to-nine unit loans that we're still able to treat as standard, DSCR.

So, typically, a five-plus unit property would be considered a commercial property and not a standard residential property. But now with our new loan programs, specifically our DSCR, one of our favorite programs, we can offer that as more of a standard loan, which you'll see here allows us to offer much better rates and terms. So let's get into the rates for today. As we do every day, we typically wanna check out the ten-year treasury yield that's going to track overall. Let's pull up the last five days.

That's going to track the rates overall, especially when we're talking about comparing different loan programs, which is what this show is all about. So if you look here, everything's been trending downward recently, but we always wanna pull up the overall here. And, definitely, had a lot of downward momentum here recently and a little bit of up. But overall, we're still at basically one-year lows, so great time to be out there shopping. So we always wanna put that into perspective.

Now let's get into our actual live rates. So here are our live rates for this morning. We always compare a standard setup so we can compare across all the programs: a single-family home, 500,000 purchase price, 300,000 loan amount. That's a low 60% LTV, seven-sixty estimated FICO score, and 40% debt-to-income ratio. That way we can compare all these programs side by side, apples to apples.

So first up, our conventional option for a primary home. This is what you think of when you think of a mortgage, typically a standard thirty-year fixed. Rates come in today as low as 5.875. APR there, 6.111. And our FHA options allow more leniency on credit issues and higher overall debt-to-income ratio. So if our customer has any trouble qualifying conventional, we typically wanna look at FHA.

Does require upfront and yearly mortgage insurance. So the rates are very low here, 5.125 rate, but you always wanna consider the APR 6.033 when you factor in the extra cost and mortgage insurance, etcetera. And our VA programs for eligible vets and active service members, these programs are amazing. 5.25 lowest rate option today. Finally, PR 5.512.

So notice when you compare that to FHA, even though it looks like a slightly higher rate, the APR is much, much lower. So those VA programs are typically the best option for our eligible borrowers. USDA, for the properties in USDA eligible areas, that's the rural areas of the country, coming in today at 5% rate. Final APR there, 5.698. So if we're comparing that to FHA or conventional for our typical customer that's shopping there in those rural areas, definitely consider USDA if the property and the income are eligible.

And now where we love to shine here at the mortgage calculator are non-QM options. So these are options that are beyond the standard agency and government options. So these allow us to use alternative docs such as bank statements, ten-ninety-nines, P&L statements, etcetera. Typically helps for our self-employed borrowers. So to use alternative docs, we can do a primary home, same rate as conventional, 5.875.

Finally, PR comes in at 6.145, just a touch higher than conventional, which is pretty typical. We expect a little bit of higher cost on the non-QM options. And we can also use our non-QM options for investment properties. Rates coming in at 6%. Finally, PR is 6.321.

Not much change there since last week. And conventional for an investment property, I mean, lowest rate option, 6% as well. APR is 6.311, so just a touch lower. And some of our favorite options, as I mentioned before, our DSCR option. This is for a standard single-family home that we do here on the live demo.

We'll go over our more in-depth option for a five-to-nine unit in a second. So for a standard single-family home, one unit, DSCR, no income or employment needed, we simply use estimated rents to determine a DSCR ratio. The rents can cover the expenses, AKA the property cash flows. That's a ratio of one or higher, which is what we use for these options here. And we set a standard three-year prepayment penalty on this.

Rates come in at 5.999. Finally, PR 6.222. And we can add a five-year prepayment penalty to lower the rates even more. Can get a rate as low as 5.875. Finally, PR there, 6.181.

And now let's get into today's topic. We are going to build off the DSCR. So instead of just looking at a standard one-to-four unit, typically, those rates would be eligible for a standard one-to-four unit standard residential property. Let's look at what would be considered, or would have been considered in the past, a commercial-only property. So I have an example here.

As we do every day, we wanna look at an actual live example. So this property is a property listed for sale here in my area. It's a multifamily property, but you have to look deep in notes here. Notice it says it's a legal five-unit building, operated to six-unit. Obviously, that's a whole separate set of issues if we're doing a nonperforming loan, but let's consider that we're just going to refinance it as a legal five-unit property.

So a five-unit property is typically considered a commercial property. Anything over four units is not a standard residential property. So typically, this would only be considered for your standard commercial financing: higher rates, lower LTVs, a little bit more restrictions, a lot of different hurdles you have to jump through when you go through commercial. Now we can offer this option with a standard DSCR.

So first up here, let me scroll back up to the top. Our standard DSCR program, this is our five-to-nine unit program. So for very small, what would have been considered a commercial property, five-to-nine units residential, we can still do that as a standard DSCR. So this is an exact example for our five-unit property, and we can go up to 25% down, 75% LTV. And this includes a five-year prepayment penalty, which, again, prepayment penalty is pretty standard.

And especially when we're doing this large loan, we wanna make sure we have the best rates and pricing. Now we can do up to 70% LTV for cash-out refinances. So I will show that here in a second. But for our standard purchase, we can go rates as low as 7.625, has a cost of 1.975 in discount points in cost. And this is a simple DSCR loan.

So, of course, we need to consider our insurance and taxes. But as long as the property can cover the payment and insurance and taxes, that is a DSCR ratio over one, which is what we use for this option here. And we can do 25% down, a pretty clean and easy loan when you're talking about comparing it to a commercial property. A couple other things to consider here, we use that seven-sixty FICO credit score, and we did put that five-year prepayment on there. But you see everything here is set up exactly as we were talking about.

Now if we wanna do a rate-and-term refinance, so that same property, if the property doesn't sell perhaps and the owner needs to do rate-and-term refinance, we can do that up to 75% LTV. So the same LTV as a purchase. And this example, we added that five-year prepayment penalty. And not surprising here, pretty much the same rate, 7.625 lowest rate, costing 1.975 discount points and costs. And we can go up to that 75% LTV of that value.

So same scenario there, five-year prepay, seven-sixty credit score, pretty simple DSCR option here for rate-and-term. Now, the other cool option here is cash-out. So a lot of our commercial options are very restrictive on the cash-out. So this DSCR option, pretty simple and straightforward. We can do up to 70% LTV cash-out for five-to-nine unit properties here under the standard DSCR program.

So again here, rates as low as 7.625, cost a little bit less there, 1.725 discount points in cost, and that's because our loan amount is a little bit lower here. But, again, a very straightforward DSCR loan. It's not a commercial loan, and definitely something that we love to do here for our customers a little bit is a little bit outside the box. Not every lender offers it. These programs are amazing.

So let me pull back up my slide here. So I don't think I see any questions here. But again, if you'd like a full breakdown, a full itemized loan estimate for your exact scenario, please get with our team members. We can offer the five-to-nine unit DSCR as well as any of our standard loan program options. And you can also go to our live rates page there that I was just viewing and see our live rates anytime for all of our standard options.

There's dozens of other options beyond what we just look at every day. So it looks like we'll wrap it up. Thanks everybody for joining us. We'll be back on Wednesday with another episode of Daily Rates Live and make a deep dive on a different topic. So we'll see you soon.