🏘️ How to Get a DSCR Loan With Less Than 1.00 DSCR| Daily Rates LIVE

🏘️ How to Get a DSCR Loan With Less Than 1.00 DSCR Join us LIVE to review Daily Mortgage Rates and learn how investors can qualify for a DSCR loan even when a property's DSCR is below 1.00. We’ll explain how lenders evaluate low-cash-flow properties and what factors—such as credit, reserves, and down payment—can help strengthen approval. You'll also learn when these loans make sense for value-add or appreciation-focused investments. Watch a live example showing rental income, loan amount, monthly payment, and DSCR calculations. Ideal for investors pursuing opportunities beyond traditional cash-flow requirements.
📌 Key takeaway: A DSCR below 1.00 doesn’t always prevent financing when the overall deal is strong.
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The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as thousands of Non-QM mortgage loan program variations using alternative income documentation! 

Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!

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

Speaker 0:12

Good morning everyone. My name is Nick Hiersche from the mortgage calculator. We are a lender and broker at over 20 states. And what we do here every day is review the live market conditions, check out our live rates for our standard programs, and we're going to do a deep dive into a topic. Today's topic will be our DSCR loans, one of our favorite products, for ratios below 1.00, which is basically a property that does not quite cash flow based on the current market rents, and may actually lose a little bit of money per month. But our investors that may be purchasing this property may have another reason, such as perhaps converting with short-term rentals, perhaps doing some renovation to increase the rents, whatever it may be, we need to make sure we have options for those properties that don't quite cash flow right out of the gate here. So we will review some of those options here in a second, but let me switch my screen and we'll check out the market conditions. Lots of news today and throughout the week. So you see we were on a nice decline here over the last five days. We're looking back on the five days. But this morning we did have a little bit of a bump with some news that wasn't in our favor. And if we pull this back over the last year, you can see we were at peaks there, came back down. Hopefully, we can turn this uh recent spike back in our direction. Probably covering it there there. You can see it now. But let's check out what that actually means for our standard mortgage programs, because mortgages do generally follow the 10-year treasury yield, uh, but not exactly. So let's see what this actually means. So these are our live rates for all of our standard programs. I just freshed this this morning, so these should be the most current here. And we have a standard scenario so we can compare the lowest rate options across all the different programs. So we set up a standard single family home, one unit, 500,000 purchase, 300,000 loan amount, 60% loan to value, 760 estimated FICO credit score is what we use, and we use an estimated 40% debt to income ratio. So that way we can compare all of the programs side by side for the lowest rate options. So first up here, our conventional option for our primary home, what most people think of when they think of a mortgage, rates today coming at 6.125, final APR 6.377. Hopefully, we continue to see that go down here as well. And for our borrowers that don't qualify for uh conventional, we typically want to explore an FHA option, which allows a little more leniency on credit issues and a higher overall debt to income ratio, uh, but does require upfront and yearly mortgage insurance. So the rates appear a little bit better here, 5.5% rate. But once you add in all the additional fees and the upfront and yearly mortgage insurance, we come in final APR 6.418, which is just a touch above conventional, which is how that typically plays out. And for our VA eligible borrowers, VA programs are amazing. Rates as low as 5.625 today, and with the much lower fees and costs overall, final APR comes in at 5.869. Definitely beats uh FHA and conventional for our eligible borrowers, so definitely typically the best option for our VA borrowers. And we do have USDA programs, USDA eligible properties, those are the uh areas of the country, uh rural areas of the country. So if the property is eligible and the borrower is eligible, these programs are great to look at. Great this morning, I'm in a 5.5% rate, final APR there at 6.209 when you include all the fees. And if we're comparing that to FHA or conventional, which is what our customer would typically be considering, I can see USDA is a little bit lower on the APR there, so maybe the best option. And where we love to shine here at the mortgage calculator is when we go outside of the box where we have tons of different non-QM options where we can use alternative docs and go beyond the standard guidelines here. And for a primary home, if our customer doesn't qualify for conventional FAJ, etc., we can switch over to using alternative docs, bank statements, 1099s, etc. And get a rate today as low as 6.375, final APR comes in at 6.628, so just a touch above conventional, but it's pretty amazing to have our customers that would otherwise not qualify be able to give them a great option. And we can use alt docs for investments, rates today coming at 6.5, final APR 6.831, and we'll scroll down and compare that to our conventional investment property options. Conventional comes in 6.375% rate this morning, final APR 6.693, which is a little bit lower than our alt dock option, which is typical, but not lower than our favorite option. Our topic for today are DSCR options. So DSCR debt service coverage ratio, no income or employment needed. These are for rental properties. We simply use the estimated rents from the rental property to determine a DSCR ratio. If the rents cover the expenses, aka the property cash flow, that's a ratio over one, which is what we use for our live pricer here. And we add a three-year prepayment penalty for this standard option. Rates come in as low as 6.125 this morning, final APR 6.436, which is beating conventional, absolutely amazing for our investors out there. And we can add a five-year prepayment penalty to make the rate even sweeter. Rates as well as 5.875, final APR 6.181, which is substantially better than conventional, which is absolutely amazing. And we even have tons of other options to add variations to DSCR, which is our topic for today. But if you scroll down the page here, there's a ton of other standard options, second mortgages, elogs, uh, rehab loans, all kinds of different options. But let's get into our example for today, where we have a little bit of an outside-the-box scenario that doesn't fit our standard DSCR scenario that is quoted here. So, first off, let's look at a property here to explain what we mean. So I just pulled up a property that was for sale nearby meet here in my area here at Fort Uh Fort Lauderdale. Uh it's for sale for $669,000. It's a nice uh little home, a three-bedroom, three-bath home, has a actually two structures on it. So can't quite tell here, but there's an ADU to the back. And if you read the description, this is a great example. It has a two-bedroom home and a one-bedroom in-law suite or ADU, whatever you want to call it. Uh so it actually has three bedrooms total. Uh, but you see here it is pretty expensive. And if we're considering the market rents on a three-bedroom home, if it was all just one three-bedroom home, uh, it probably uh wouldn't be too high. Uh, when it's split into two homes, it may be a little higher, uh, but it may also, uh it says in the description here, it may not be fully permitted. So this is where it gets a little tricky where our investor wants to purchase this home, but the actual rents may not pencil out exactly as we wish in order to get our standard options. So, in this scenario, we're gonna consider that our investor wants to purchase this home and is going to realize that the long-term rents are not going to quite cover the expenses, aka we will not have a 1.0 or higher DSCR ratio because on paper, it looks like we will likely lose money every month based on the market rents compared to our expenses. So when we pull up our pricing here, this is what this actually looks like. So for an under one ratio, we added a five-year prepayment penalty, and it was for this exact property. And what we did here in our first example is we used at least a 0.75 ratio. So even if it doesn't cash flow, as long as it stays above 0.75, meaning the uh estimated long-term rental income can cover at least 75% of the estimated expenses here, uh, we can actually finance it up to 80% low into value, which is what we have here. Now, this is also uh long-term rents. So remember, if we have to use short-term rents uh to reach that 0.75 threshold, the maximum LTV will be reduced as well. So this has to be key on long-term rents being very close to the 1.0 that we need, but not quite hitting it. We still have options and we can still go to 80% loan to value, which is pretty amazing. So here we have some rate here, 7.125 rate has a 3.35 discount point cost here if we're under one ratio. And we have a rate of 7.999, has a cost of 1.225. And notice for this exact property, uh, this is the 20% down payment, 80% loan to value. And a couple other things we added here, we did a five-year prepayment penalty, and we did use that 760 estimated FICO credit score. Now, the thing to key in on here is going to be our monthly payment. Uh, so this is where if our long-term rents are only coming in at about 3,500, uh, we're not even gonna be able to cover the mortgage end of it, but we'll also need to add the taxes and insurance in there as well. Uh so in this case, if our long-term rents are anything, you know, basically under 4,000, we're not even going to be close to having a 1.0 or higher DSCR ratio. Now, if we're uh in a little bit more uh sticky situation here where we have under 0.75, we still have options, but we do have to adjust some of our items here. So if we have under 0.75 ratio, so say the rents come in very low, but we can do this with a five-year prepayment penalty up to 75% loan to value. So we just have to reduce the LTV just a touch there, put 25% down, and this can technically accommodate a 0.00 ratio. Now that's not likely to happen. You know, we can't have zero as the rents typically, so we still need to get the rents, but there is no pricing difference, whether it's 0.1, 0.2, 0.3, 0.4, etc. Uh, so this option is great, uh leaves us wide open as long as our investor is willing to put 25% down. We don't need to worry about what the long-term rents come in, because in this uh case, our customer is going to probably change the property a little bit there. Uh so you see here some pretty amazing rates too because we're putting more down payment, 6.75 rate. That's the lowest rate option this morning for a cost of 3.475 discount points at cost. And we can even go up to an 8% rate for a par or no cost option here, which is pretty amazing. And that's because we put a little bit more down payment here, 25% down, 75% loan to value. And again, we use those estimated numbers uh 75 LTV, five-year prepay, and 760 estimated FICO credit score. So this would allow our investor out there to not worry about rents, uh, what the rents are gonna come in at. Obviously, they're gonna come in much lower than 3,000 in this example, but this is a great tool for our borrowers that need to be flexible because they have uh other reasons beyond just what you see at face value and long-term rents. Perhaps they're gonna do some rehab, perhaps they're gonna do some short-term rentals, uh, but they have options here to still get into this property. So hopefully that helps some of our investors out there that are uh on the fence looking at properties that may not quite cash flow. We still have some great options for DSCR under one. And we hope that assists you out there. If you have any questions, please go to our website, the mortgagecalcular.com. You can request a quote. Our team of 200 plus loan officers would be happy to help you out and send you a full itemized quote and loan estimate for your scenario. So thanks everybody. We'll continue to watch the rates, and we'll be back later this week with another episode of Daily Rates Live. Ethics