📈 How to Get a DSCR Loan With Interest-Only Payments| Daily Rates LIVE

📈 How to Get a DSCR Loan With Interest-Only Payments
Join us LIVE to review Daily Mortgage Rates and Learn how investors can use DSCR loans with interest-only payments to lower monthly costs and improve cash flow. We’ll explain how interest-only structures work, DSCR qualification, and key trade-offs compared to fully amortized loans. You’ll also learn which investment properties may qualify and what lenders look for. Watch a live example showing rental income, loan amount, and a comparison of payment options. Great for investors focused on maximizing cash flow.

📌 Key takeaway: Interest-only DSCR loans can reduce payments and help investors preserve cash flow.👉 https://themortgagecalculator.com/Page/Daily-Mortgage-Rates-LIVE-Video-Podcast

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Check out all episodes of Daily Mortgage Rates LIVE at https://themortgagecalculator.com/Page/Daily-Mortgage-Rates-LIVE-Video-Podcast

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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 1 0:12

Good morning everyone. Welcome to Daily Rates Live. My name is Nick Hiersche with the mortgage calculator. We are a lender and broker in over 20 states. And we have hundreds of loan officers that would be happy to help anyone out there with any quotes that they may need for any of our standard scenarios. But what we'll review today is the markets in general. Lots of news affecting rates and treasury yields, as we will look at. And then we'll actually see what that means for our actual standard programs. Doesn't move a lot day by day, but we always want to take a look. Then we'll get into our topic for every topic. We love our DSCR business purpose loans. And we have some very cool interest-only options, which we will discuss here in a moment. So let me go ahead and switch my screen and we will check out the markets today. So, as usual, when we look at mortgage rates, we typically want to look at the 10-year treasury yield that's going to track with rates overall, especially when we're talking about different loan programs. I'm in the way here a little bit, but if you move this up, you see we've had a little bit of a rise here in the last five days. This is a five-day look back period. Unfortunately, uh did drop a little bit uh this morning. So hopefully we continue to trend in that direction. But if we pull up the last year here, you see uh we've come up to about one year peaks here, and hopefully we continue down in this direction if we get some favorable news. Last week, jobs report did not help us at all. But hopefully we see that turnaround. Now let's see what that means for our live mortgage rates. Uh so if you go to our website and click on today's rates, you can check this anytime. It's going to show all of our lowest rate options for our standard loan programs. And we set up a simple scenario so that you can compare everything apples to apples across the board. We set up a standard one unit single family home, 500,000 purchase, 300,000 loan amount, 60% loan to value, 760 estimated credit, 40% estimated DTI. That way we can see the lowest rate options for each program to compare them every morning. So this morning we just refreshed this for our conventional options for primary home for a standard 30-year fix, what most people think of when they think of mortgage rates today come in at 6.25, final APR 6.504. Again, just a touch higher than it was last week. And again, hopefully we continue to see that go back down and turn up the corner there. Now, if our customer doesn't qualify for conventional, we typically want to explore some FHA options, which allow a little more leniency on credit issues and higher overall debt to income ratio. But it does require upfront and yearly mortgage insurance. So rates today come in at 5.625. But with the additional fees and costs here, final APR comes in at 6.546, just a touch above conventional, which is pretty common there. FHA is typically a little more expensive than conventional when you compare them side by side. And for our VA eligible borrowers, VA programs are amazing. 30-year fixed VA coming in today, 5.75, final APR 5.996, staying under the 6% APR there, because of much lower fees and costs overall for our eligible vets and active service members. So definitely the best option here when you compare the APR to FHA or conventional. So typically the best option for our VA borrowers. And we have USDA for properties in USDA eligible areas at the rural areas of the country. These are great options to compare as well. So if the borrower qualifies and the property qualifies, definitely want to compare. Rates as low at 5.625, a little bit lower fees here. Put the APR at 6.324. So when you compare that to uh FHA and conventional, it may be the best option for our borrowers looking in those areas. And now, oh shoot, let me refresh this.

Speaker 4:08

I don't know why. It uh it's showing an option that it shouldn't there.

Speaker 1 4:23

Well, I guess I'll skip over the non-QM. Of course, we have rates as low as six percent, but I can tell that the uh fees are a little bit off there. We would never uh charge that many fees. Of course, if we got some seller credits or something like that, we could get that down. But uh the APR of 7.571 doesn't really make a lot of sense here. So these ones are uh rates that we could offer if we had enough credits, uh, but those won't actually uh be something we can consider right at this second. So our conventional option is showing correctly here. Our 30-year fix for conventional coming in at 6.375, which is pretty typical there. Finally, 6.693. So again, that's just a touch higher than I believe it was in the last time. And our DSCR option, some of our favorite options here. This one with a three-year prepayment penalty, no income or appointment needed. Simply use the rents from the rental property. Uh, this one is definitely coming in. We can get rates as low as 6%, but that does require substantial buy down. So we need to sell their credits of some kind. Uh, but at 6% rate, the final APR comes in at 7.556. So we probably want to choose that option. We would choose a more standard option, which you see here under the five-year prepay, which means that program is um working correctly there. Rates as well as 5.99 make a lot more sense with a final APR of 6.310 when we add that five-year prepayment penalty. So this is the correct option here, and definitely one that we will discuss here in a moment. We have tons of other options here if you scroll down the page for HELOCs, second mortgages, rehab loans, all kinds of options. But we will cue in on the DSCR programs that we offer with interest only. So those are a little harder to quote. We don't put those uh always live on the page here. You'll see some basic options below. But let's talk about a specific scenario so you can see how interest only looks for one of these DSCR options. Uh, so we'll use the same property we did last week. We've done uh DSCR for the last couple episodes. So this is a great example of a property in a nearby area that someone may want to buy under a DSCR loan because it does have technically two separate units, so it would be a good investor option. And it's here for a reasonable price here $669,000 in the area. Uh, but many times, uh just as our last uh couple episodes talked about, the rents that are coming from the long-term rents, if this was rented long-term, may not quite cover the expenses, which is pretty typical of what we need for DSCR loans. So in this case, if the rents don't quite cover and we need more cash flow, one of the best tools we can use for our investors are interest-only options, where we can add an interest-only period to any of our standard DSCR loan products. So let's look at an actual example here. So, first up is our 30-year interest-only option. And this is only for our DSCRs that we're exploring right now. We added a five-year prepayment penalty in order to show the best uh rates and costs. Uh, but here in the notes, I mentioned that we do offer a 30-year and 40-year interest only. We'll look at the 40-year next. And these are fixed rate products, not arms, so they're not adjustable. This is a fixed rate for the entire period of the loan that we're talking about here. Now, the interest only period is temporary, it is a 10-year period, after which the loan turns into a standard fully amortizing loan. So, in this case, we have the 30-year interest only option, which means we have the 10-year interest only period, followed by a 20-year fully amortizing term. So, this one will increase in payment, but it is not an adjustable rate mortgage, which is often confused with. So, here you see we have some great rates. This is for 20% down. The 15% down option for DSCR typically doesn't work with the interest only add-on because that's kind of an extra feature there. Uh, so for a standard 20% down, if we want to lower our monthly payment and increase our cash flow and our DSCR ratio, we would add this option. So here we have some great rates, 6.125 rate, have the cost of 3.475 discount points. And our rate here, uh, we can go up to 6.875 and actually get a lender credit of 0.025 back towards our closing costs. Uh, but see here, the key thing that we're uh editing here is our monthly payment is going to be much lower than our fully amortized loan. So here, if we get the lowest rate option, we have a $2,730 monthly payment. Of course, we need to cover taxes and insurance. Uh, but this would, in many cases, make a property that would not cash flow, now cash flow. So a little bit uh higher rates and costs to add that interest-only feature, but you see it makes a big difference here on the monthly payment amount. And scroll down here to the details, then we did the uh 20% down, 80% loan to value. We did set the five-year prepayment penalty, and we did set the estimated credit score to 760. So this is a great example where if the long-term rents and the standard 30-year fix uh wouldn't work because of the higher payments, we could make this property cash flow under this interest only option. Now, another option is our 40-year interest only, which is actually a little more common because with our 40-year interest only, in this example here, we have a 10-year interest only period followed by a 30-year fully amortizing term. So this would put our payments when they get reset there after the end of 10 years to our fully amortized payment uh in the standard 30-year realm there that we're pretty much typically accustomed to. Uh, so this is actually the more popular option. Of course, it's still interest only. Uh so you see here on the quote, our 6.125 rate has a cost of 3.1 discount points and costs, actually, a touch cheaper than the 30-year interest only, uh, but the monthly payment is still going to be the same. So the effect on your cash flow is going to be the same. It's just a matter of what do you want the fully indexed rate to be once you end this interest only period. And this is a little different option. So we do have an option at 7.125 rate to give 0.025 back to closing costs. So very similar to the other setup, uh just a little bit different there. And again, this was 20% down, the 40-year term, five-year prepayment penalty, and we use that estimated 765 or credit score. So these are great options to improve our cash flow and improve our DSCR. So remember, for many of our loan options, the DSCR ratio has to be over one, meaning the property will cash flow, the rent income, if we're estimating it under long term, needs to cover the expenses, the P ITIA here, the monthly payment, as well as any taxes and insurance and the association. Uh so this is how we can often take a loan that does not quite meet our one ratio, switch it to the interest-only option, and we can offer pretty much the same rates, pretty much the same program, and now meet our DSCR ratio. So it's a great tool for our investors out there looking to be a little more little more uh aggressive and looking to uh possibly get into uh these properties, like we looked at there. As we talked about before, many of our investors uh would be looking at these properties to possibly rehab. So maybe they think they're gonna get the rents increased once they get into the property, or maybe they're planning on doing short-term rentals, which means their ratio will be much higher than one. But for underwriting purposes, we need to typically meet that 1.00 ratio, or we have to choose one of the options we have for under one ratio, which was our topic last week. So for anybody out there looking for a full quote, just go to our website, at mortgagecalculator.com. You can check out the instant rates that you saw there. But of course, if you want your full loan scenario, full loan estimate broken out, please request it on the website. We'll connect you with one of our hundreds of loan officers, and they would be happy to help you out. And hopefully we continue to see the rates turn around and in our favor this week. So good luck, everybody out there, and we'll be back later this week with another episode of Daily Rates Live.