garrick@freshhomeloan.com    (510) 282-5456
garrick@freshhomeloan.com
(510) 282-5456
Introducing the New DSCR 5-8 Program: Empowering Investors to Scale Up

Investors, take note: Fresh Home Loan Inc’s DSCR (Debt-Service Coverage Ratio) program has expanded, bringing incredible opportunities for those looking to maximize returns on residential investments. The new DSCR 5-8 Program is tailor-made for properties with 5 to 8 units, giving your investor clients more flexibility and access to capital.

What is a DSCR Loan?

A DSCR (Debt-Service Coverage Ratio) loan is a type of financing designed primarily for real estate investors. Unlike traditional loans that rely heavily on the borrower’s personal income and employment history, DSCR loans focus on the property’s ability to generate sufficient income to cover the loan’s debt payments.

Here’s why this program is a game-changer:

Program Highlights

  • Loan Purpose: Perfect for Purchases, Rate and Term Refinances, and Cash-Out Refinances.
  • Property Types: Residential 5-8 unit properties (Investment Only).
  • Loan Amount: Up to $2 million, ensuring coverage for larger investments.
  • Credit Requirement: Minimum FICO score of 680, making it accessible to a broad range of investors.
  • Loan Terms: Options include 15-Year Fixed or 30-Year Fixed for predictable payments.
  • DSCR Requirement: Minimum DSCR of 1.00, ensuring a balanced approach to qualifying properties.

Why This Matters

As the housing market evolves, multi-unit residential properties are becoming increasingly attractive for investors. The 5-8 unit category is often overlooked but offers:

  • Higher cash flow potential compared to single-family or smaller multi-unit properties.
  • Opportunities to scale portfolios while staying within the residential lending space.
  • A more diverse tenant pool, reducing risk.

Who Benefits from the DSCR 5-8 Program?

This program is ideal for experienced or first-time investors looking to expand their portfolios with medium-sized residential properties. Whether the goal is long-term rental income or repositioning assets through refinancing, the DSCR 5-8 Program provides the flexibility and capital they need to succeed.

Advantages of Using Just a Lease Agreement or Appraisal for DSCR Loans

DSCR loans simplify the loan approval process by allowing borrowers to qualify based on the property’s financial performance rather than their personal finances. Using just a lease agreement or appraisal offers several benefits:

1. Lease Agreement Advantage

  • Proof of Income: A lease agreement demonstrates rental income, directly supporting the DSCR calculation.
  • Streamlined Approval: Borrowers don’t need extensive documentation like tax returns or pay stubs.
  • Future Income Potential: For properties with new tenants or lease agreements, lenders may consider projected income, providing more flexibility.

2. Appraisal Advantage

  • Market Value Basis: Appraisals provide the property’s current market value, helping calculate potential rental income even if the property isn’t currently leased.
  • Supports Cash Flow Estimates: Many DSCR programs accept appraiser-supplied rental estimates, allowing investors to secure financing based on the property’s income-generating potential.
  • Flexibility for Vacant Properties: Investors purchasing vacant properties can qualify using the appraiser’s rental market analysis instead of actual lease income.

Key Benefits of DSCR Loans for Investors

  • No Personal Income Documentation: Ideal for self-employed investors or those with fluctuating incomes.
  • Focus on Property Performance: Simplifies the underwriting process by evaluating the property’s financial health.
  • High Loan Limits: Enables investors to finance larger multi-unit properties.
  • Versatility: Available for purchases, refinances, and cash-out refinances.
  • Faster Approval Process: Less paperwork means quicker decisions and funding.

Who Should Use a DSCR Loan?

  • Real estate investors looking to expand their portfolio.
  • Borrowers with multiple investment properties who want to avoid personal income qualification.
  • Investors purchasing properties with existing or potential rental income.

Why is the DSCR 5-8 Program a Game-Changer for Investors?

Typical residential loans, including conventional financing options like Fannie Mae or Freddie Mac loans, are designed for 1-4 unit properties. This leaves a gap for investors aiming to expand into 5-8 unit residential properties, which offer higher rental income potential but often fall outside the scope of traditional loan programs. Here’s why the new DSCR 5-8 Loan Program is a breakthrough for real estate investors:

The Limitation of 1-4 Unit Loans

  • Loan Restrictions: Traditional residential loans are capped at 4 units, requiring investors to transition to commercial loans for larger properties.
  • Stricter Underwriting: Commercial loans typically demand complex documentation, higher down payments, and more stringent qualification criteria.
  • Limited Loan Programs: Conventional loans may not cater to the specific needs of small-to-mid-sized multi-unit properties.

Advantages of the DSCR 5-8 Loan

  • Expands Investment Opportunities
    With the DSCR 5-8 program, investors can finance properties with 5-8 residential units, which often generate higher cash flow and better economies of scale compared to 1-4 unit properties.
  • Simplified Qualification
    Unlike traditional loans that evaluate the borrower’s personal income, DSCR loans focus on the property’s income performance. This allows investors to qualify based on the rental income or projected income from the property, streamlining the approval process.
  • Avoids Commercial Loan Complexities
    The DSCR 5-8 loan retains the simplicity of residential financing while bridging the gap to larger properties. Investors avoid:
    • Lengthy approval timelines.
    • High interest rates and fees typical in commercial loans.
    • The need for extensive business financial documentation.
  • Better Loan Terms
    • Fixed-Rate Options: With 15- and 30-year fixed-rate terms, investors can secure stable, predictable monthly payments.
    • Lower Credit Thresholds: A minimum FICO of 680 keeps this program accessible to more investors.
  • Scales Your Portfolio
    Properties with 5-8 units offer more rental income streams under a single loan, making them a smarter way to scale compared to acquiring multiple smaller properties.

Who Should Use This Loan?

  • Investors Ready to Scale: Those looking to expand their portfolio into mid-size residential properties.
  • Cash Flow Focused Investors: Those prioritizing properties that can cover their debt service through rental income.
  • First-Time Multi-Unit Buyers: A great stepping stone into the 5-8 unit property market without diving into commercial financing.

The Bottom Line

The DSCR 5-8 Program breaks down barriers for investors who’ve outgrown traditional 1-4 unit financing options but want to avoid the hurdles of commercial lending. By focusing on the property’s performance, it simplifies the process, reduces stress, and opens the door to more profitable opportunities.

At Fresh Home Loan Inc., we pride ourselves on being a local, independent brokerage dedicated to helping investors and homeowners achieve their real estate goals with innovative financing solutions. Led by Garrick Werdmuller, a seasoned mortgage expert with years of experience navigating the complexities of real estate investment, we deliver personalized service and unmatched expertise. Whether you’re scaling your investment portfolio or buying your first home, Garrick and the Fresh Home Loan team are here to guide you every step of the way. Let us show you how a truly independent mortgage partner can make all the difference.

For more information contact Garrick Werdmuller: https://freshhomeloan.com/schedule-a-meeting/
Garrick Werdmuller
garrick@freshhomeloan.com
1151 Harbor Bay Parkway Suite 136
Alameda CA 94502
(510) 282-5456

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All loan approvals are conditional and not guaranteed and subject to lender review of all information. Loan is conditionally approved when lender has issued approval in writing, but until all conditions are met, loan cannot be funded. Specified rates and [products may not be available to all borrowers. Rates subject to change according to market conditions and agreed upon lock times set by borrower. Fresh Home Loan Inc. is an Equal Opportunity Mortgage Broker in California. This licensee is performing acts for which a real estate license is required. Fresh Home Loan, Inc. is licensed by the California Department of Real Estate #02137513 NMLS # 2124104

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Garrick Werdmuller

garrick@freshhomeloan.com
(510) 282-5456