Redfin called this the strongest buyer's market on record. The Fed hiked 25 basis points, and the 10-year Treasury pushed above 5%. On tonight's Buy Right, Borrow Smart LIVE, We sorted the headlines from what actually matters if you're buying, selling, or financing a home right now.
Then we got into your questions: DSCR loans held in an LLC, how seller repair credits are written, the new rental income rules, solar leases, and the Austin market.
Here's the useful part, cleaned up.
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Yes. Most DSCR lenders allow the property to close directly in an LLC. That's one of the big differences between DSCR financing and a standard conventional investment-property loan.
DSCR stands for debt service coverage ratio. Instead of qualifying primarily from your personal employment income, the lender looks at the property's rental income relative to its housing expense. If qualifying rent is $3,000 a month and the qualifying property expense is $2,000, that's a 1.50 DSCR. The exact calculation and minimum ratio vary by lender, and your credit, down payment and reserves still matter.
Most standard Fannie Mae and Freddie Mac loans close with an individual borrower rather than an LLC. DSCR loans are business-purpose, non-QM loans, so entity vesting is common. Our team works with roughly 80 investors that offer DSCR financing, and the vast majority allow LLC vesting.
The LLC does not usually get you off the hook personally. Most residential DSCR lenders still require the owners behind the LLC to personally guarantee the loan. The LLC may be the borrower and hold title, but somebody is still standing behind the debt.
This is exactly the kind of structuring we sort out on a Roadmap call because the details vary quite a bit from one DSCR investor to another.
It depends on what is wrong with the roof and how the agreement is written.
If the contract specifically says the seller is giving you a credit to replace the roof, the lender may want to know more about the roof's condition. If there's an active leak or another problem affecting the safety, soundness or structural integrity of the property, changing the wording of the credit doesn't make that condition disappear. The lender may require the repair before closing.
If the home already meets the loan program's property-condition requirements, a cleaner option may be a general seller credit toward allowable closing costs rather than tying the credit to a specific repair. Then you can complete the repair after closing on your own timeline.
Just make sure you can actually use the credit. Seller-concession limits vary by loan program, occupancy and down payment, and you need enough allowable closing costs and prepaids to absorb it. On conventional loans, for example, the limit on a primary residence can range from 3% to 9% depending on the loan-to-value ratio.
If the repair genuinely has to be completed for the loan to close, then it becomes a different conversation. The repair gets completed or handled through an allowable completion arrangement, and the lender documents that the required work is done.
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Yes. Fannie Mae changed the rules September 2, and in some ways they're easier. In another important way, they're stricter.
If you're buying a new primary residence and converting your current home into a rental, Fannie no longer uses a new lease agreement to establish the rent on that departing residence. In fact, the new guideline specifically says a lease agreement is not permitted for this purpose.
Instead, the lender can establish market rent from an appraisal, a Form 1007 comparable-rent schedule, or market-analysis tools such as Zillow, Redfin or MLS. If the lender uses one of those market tools, it needs at least three comparable rentals.
The lender then takes 75% of the market rent and subtracts the property's full PITIA payment: principal, interest, taxes, insurance and applicable association dues. If the result covers the payment, the rental income can offset that mortgage for qualifying purposes. If it comes up short, the difference counts against you in your debt-to-income ratio.
The tougher part is reserves. If you have less than 12 months of property-management experience, Fannie now requires six months of reserves for the departing residence's PITIA, in addition to any separate reserve requirement created by owning multiple financed properties.
So the documentation got cleaner. You no longer need to manufacture a lease with a tenant before you've even moved out. But if you're a new landlord, you need enough money left after closing to satisfy the reserve requirement.
From a resale standpoint, both solar leases and power purchase agreements can create headaches.
When you sell the home, the agreement has to be dealt with. Depending on the contract, the buyer may need to assume it, the seller may have to buy it out, or the parties have to find another solution. Some buyers simply don't want to take over a solar payment, which can shrink your buyer pool.
The buyout can be brutal. We have a listing right now where the buyout came back around $80,000. The payment is roughly $357 a month today and climbs to around $900 a month by year 15. That's an aggressive escalator and creates a very different calculation than simply looking at today's electric bill.
If you want solar, owning the system is generally cleaner from a resale standpoint than signing a lease or PPA. You can buy it with cash or finance the purchase, but either way you own the equipment rather than transferring a long-term third-party energy contract to the next homeowner.
Before you sign anything, check out Google's Project Sunroof at sunroof.withgoogle.com. Plug in your electricity use and compare the economics of a power purchase agreement, lease and ownership. Every time we've run the numbers, ownership has made more sense than the lease or PPA. That doesn't guarantee the same answer for your house, but it's a useful place to start.
Austin is unquestionably soft right now, but that doesn't make it a crash.
The city added a huge amount of housing during and after the pandemic while growth expectations were enormous. Demand cooled, supply caught up, and Austin gave back more of its pandemic-era price run than many other major markets.
Redfin's latest buyer-versus-seller data makes the imbalance pretty clear: in August, Austin had about 115% more sellers than buyers, meaning there were more than twice as many sellers competing for the available buyers.
But Austin isn't one market. Some neighborhoods, price ranges and property types have held up much better than others. Even after the pullback, values remain well above where they were before the pandemic. The mistake would be looking at a national or even metro-wide headline and assuming it tells you what a particular house is worth.
For buyers, the softer market means more selection and more negotiating leverage. It does not mean every Austin seller is desperate or every property is a bargain.
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