Frequently Asked Questions
Investment Property Lending - Your Questions Answered.
Straightforward answers to the questions I hear the most often - without the sales pitch.
DSCR Loans
What is a DSCR loan?
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DSCR stands for Debt Service Coverage Ratio. Qualification is based on the property's rental income and mortgage payment, rather than your personal income and debts. The DSCR metric replaces your DTI, so your personal debts don’t affect these loans. DSCR loans are not no-documentation loans - they still require solid credit, a meaningful down payment, and reserves.
How do I avoid using my tax returns to qualify?
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A DSCR loan is the most common path. Because qualification is based on rental income rather than personal financials, tax returns and paystubs aren't required. "No tax returns" doesn't mean no documentation - you'll still need a credit pull, proof of reserves, and a rental income assessment.
Can I get an investment loan in my LLC?
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Yes. DSCR loans are commonly used with LLCs and other entities. The LLC is typically the borrower and owner of the property while you serve as a personal guarantor. You'll need to have your entity documents in order - operating agreement, articles of organization, required annual reports etc. Deals are frequently delayed because entity documents are outdated, incomplete, or missing. Loans to entities still require the guarantors - the individual person(s) - to be personally qualified, including using their personal credit scores as the basis for the loan.
Conventional Loans
What's better - DSCR or Conventional?
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Neither is universally better. Conventional loans often win on total cost when you factor in fees, rates, and prepayment penalties - but they require personal income qualification and personal DTI. I run this comparison with every client before recommending a direction.
An accurate rate quote requires knowing all of the actual loan variables - credit score, LTV, property type and location, loan program, borrower experience - the list goes on. A rate quoted without that information is a sales-pitch number, not a real quote. My goal is to give you an accurate picture once I know your situation.
Why can't you just tell me what the rate will be?
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What's the minimum down payment for an investment loan?
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Conventional investment loans generally require 20%–25% down depending on your profile. DSCR loans typically require 15%–25%. These are program minimums - your situation may require more. Anyone quoting a specific down payment without knowing your full picture is guessing.
Do you offer 100% financing?
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No - and 9 times out of 10, anyone who says otherwise without serious caveats deserves your skepticism. Legitimate investment loans require a down payment. "No money down" strategies are typically deceptive marketing practices. Some involve seller financing or creative financing, which have their own complexity, benefits, and risks, but combining these tactics with investment loans is very difficult.
Loan Terms and Structure
What are prepayment penalties?
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A fee charged if you pay off the loan within a specified time period. Conventional loans typically don't carry them. DSCR and private/specialty programs frequently do - up to 5 years in many cases - and can be a flat amount or vary with time. Prepayment penalties are one of the most important and most overlooked terms in an investment loan.
Does it matter where my cash to close comes from?
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Yes. Not all cash can be used for your loan, especially if you’re intending to borrow the cash from another source. Recent large deposits, gifts, or some business capital inflows and outflows can trigger additional requirements. If you're unsure of what’s allowed - ask your lender early.
Househacking and First-Time Investors
Yes - and it's one of the most common strategies for investors. Owner-occupied financing usually offers better terms than investment financing. However, your intent at purchase must genuinely be to occupy the property as your primary residence, including moving into the home within a short time period after Closing. Misrepresenting occupancy intent is mortgage fraud and a crime.
Can I buy a home now and convert it to a rental later?
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What is househacking and how does financing work?
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Househacking is purchasing a multifamily property, living in one unit, and renting the others. Because you're occupying it, you can use owner-occupied financing with more favorable terms. For qualified veterans, a VA loan makes this strategy particularly powerful.
“Experienced investors” have owned and operated rental real estate for at least 12 months within the past few years. Investors who do not meet this definition are considered “first-time”, “new”, or “inexperienced” investors. There’s nothing wrong with being a new investor - we were all new investors at some point - but some investment loan programs are only available to experienced investors. The qualifications to be considered an experienced investor vary from program to program.
What’s the difference between “first-time” vs “experienced” investors?
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Still have questions about your situation?
I offer free consultations to walk through where you stand and what your realistic options look like. No obligation - just a straightforward conversation about your deal.