When it comes to financing real estate investments, time is often of the essence. Real estate investors are constantly on the lookout for opportunities, and delays in securing financing can mean missing out on a potentially lucrative deal. In this blog post, we will dive into the process of closing a DSCR (Debt Service Coverage Ratio) loan and explore how long it typically takes.

Understanding the DSCR Loan Timeline

Steve, a real estate investor, posed a critical question to Beau: “How long does it take to close a DSCR loan, and what's involved in the process?” Beau's response sheds light on the various stages and factors influencing the timeline:

• Average Duration: DSCR loans typically take two to four weeks to close. However, Beau suggests that the majority tend to be closer to the 30-day mark.
• Factors Impacting Timeline: Several factors can either expedite or prolong the closing process. These factors include the need to open escrow, preparing all necessary title work, and obtaining a closing protection letter and insurance.
• Documentation and Entity Requirements: Borrowers are required to provide specific documentation, including entity documents and signed operating agreements. Delays can occur if these documents are not readily available.
• Title Work and Insurance: Obtaining title work and insurance, complete with a mortgage clause, can add extra time to the process. It might take up to a week to secure these crucial elements.
• Appraisal Scheduling: Appraisals are a crucial part of the loan process. Scheduling delays with appraisers or difficulty finding an appraiser in the area can extend the timeline, sometimes up to three weeks.

The Key to a Faster Closing

Beau emphasizes that the key to a faster closing lies in the prompt return of initial documents and quick appraisal ordering. Here's a breakdown of the essential steps:

1. Initial Document Submission: Borrowers should swiftly return all requested documents and address any additional questions from the lender.
2. Title and Appraisal: Timely receipt of title work and immediate appraisal ordering are crucial. Delays in either can significantly impact the closing timeline.
3. Final Underwriting: Once all necessary elements, including title and appraisal, are in place, the file proceeds to a final underwriting stage. This typically takes an additional two to three days.
4. Closing Documentation: After final underwriting, the necessary closing documentation is ordered.

The Role of Appraisals

Beau notes that, in most cases, the primary factor affecting the closing timeline is the appraisal process. If the borrower and lender can efficiently manage the documentation and appraisal scheduling, it's possible to close a DSCR loan in as little as two weeks. However, it's more common for these loans to take three to four weeks.

Conclusion

Closing a DSCR loan involves a series of steps and documentation requirements. While the process can take anywhere from two to four weeks, the key to expediting the timeline lies in prompt document submission, efficient appraisal scheduling, and addressing any issues that may arise, such as repairs indicated in the appraisal.

Real estate investors seeking financing for their properties should be aware of these factors and