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Retirement Strategy for Investors: Using DSCR Loans to Build Wealth Through Real Estate

By February 12, 2026Real Estate Pros Show

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Show Summary

In this episode of the Real Estate Pros podcast, host Michelle Kesil speaks with mortgage expert Michael Banner about DSCR loans and their significance for real estate investors. Michael shares insights on the nuances of these loans, common misconceptions, and how they can benefit investors, especially in today’s market. He emphasizes the importance of proper preparation and understanding the loan process to avoid pitfalls. Additionally, Michael discusses the role of real estate in retirement planning and offers advice on how to leverage mortgages for financial growth.

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    Investor Fuel Show Transcript:

    Michael Banner (00:00)
    Every other ad is DSCR loan, the easiest loan in the world. 20 percent down, closed with no questions. You don’t even have to have a job. Well,

    The truth of the matter is all of that is true, but there are nuances to this loan. And if you don’t do it correctly in the very beginning, all those great things that made you want to do this kind of explode in your face a week or 10 days before closing it. ⁓ I experienced this a lot because I get calls from people. You know, Michael, I was referred to you, but I went somewhere else. OK, no problem. You know, my closing is scheduled for this Friday.

    And I just got a call from my lender. I went to four hundred thousand dollar investment home. I beautiful credit. I’m putting up 20 percent, which is 80 grand. And they just told me I need another five percent. my God. What am going to do?

    Michelle Kesil (02:23)
    Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chat with, Michael Banner, who has been in the mortgage business for 44 years. So really excited to have you here today, Michael.

    Michael Banner (02:42)
    Thank you so much, Michelle. So excited to be here. I’ve been on before and I just love your platform. It’s just, you know, it’s the best when you want to talk to investors.

    Michelle Kesil (02:49)
    Yeah, absolutely. I think that our audience is lucky to hear all of the wisdom that you have. And I know that you want to share a lot about DSCR loans. So let’s dive in.

    Michael Banner (03:00)
    Yeah, I really appreciate you letting me do this because I’m sure every mortgage person in the world wants to come on your podcast and talk about DSCR to investors. But it really has struck me the last few years, especially the last 12 months. You you get on Facebook, you get on LinkedIn, you get on Instagram. These are things I’m active on.

    Every other ad is DSCR loan, the easiest loan in the world. 20 percent down, closed with no questions. You don’t even have to have a job. Well,

    The truth of the matter is all of that is true, but there are nuances to this loan. And if you don’t do it correctly in the very beginning, all those great things that made you want to do this kind of explode in your face a week or 10 days before closing it. ⁓ I experienced this a lot because I get calls from people. You know, Michael, I was referred to you, but I went somewhere else. OK, no problem. You know, my closing is scheduled for this Friday.

    And I just got a call from my lender. I went to four hundred thousand dollar investment home. I beautiful credit. I’m putting up 20 percent, which is 80 grand. And they just told me I need another five percent. my God. What am going to do?

    mean, I don’t have another 20 grand. I well, you know, you know, there’s only one reason for that. And that’s the rental coverage or DSCR debt service coverage ratio.

    The whole point of this loan is

    your mortgage payment cannot exceed the potential rent. When we order an appraisal, we order a rental comparison. And if that rental comparison comes back, if your mortgage payment is $2,500 and the rental comparison says the average rent for that unit is $2,499, $1 short, you’re in trouble. Oh my God, let alone $100 short.

    or $200 short. Now, so I’ll end up saying to this person, may I ask, you did a rental comparison before you signed the contract, right? No, my relative or my mortgage person or the investor I bought this from didn’t even bring that up. Why would you spend five or $600 on an appraisal? DSCR, debt service coverage ratio. We do a rental comparison for our clients in the beginning.

    before they spend any money to make sure that their debt service covers the rent. Or, you know, and that’s one of the things that makes the loan flow through. So that’s the big problem I’m seeing is people not being prepared. And then, of course, even when you are prepared, Michelle, you run a rental schedule and everything looks great. And they put down a $10,000 deposit or whatever they put down. And then

    Two and a half weeks later, the appraiser comes back and disagrees with the rental schedule and it is a hundred short. And suddenly again, how do I go from 80 % loan to value to 75? Well, our company, American Pacific Mortgage, which is the night largest independent lender in the country, we do some special things with our DSCR loan. Number one, almost all DSCR loans allow 2 %

    seller contributions. American Pacific mortgage allows 5%. So I know maybe some of your viewers are going, oh my God, sellers don’t want to pay 5%, maybe. But if it’s a week before closing and the appraisal comes back a little teeny short and they are 50 or $100 short, they don’t have that extra 5 % down, 10 grand, 20 grand, 30 grand.

    We can use that five percent to lower their rate to buy their rate down. So that extra three percent that American Pacific does, as opposed to our competition, two percent. We allow five percent seller contributions. I can’t tell you how many deals we save on a weekly basis because we’re lowering your rate three eighths of a point. Really? Yes. And that’s lowering your payment. Ninety two dollars. Now you’re back to 20 percent down. So again, it’s right back to those.

    nuances to carry you to closing. It is the greatest loan in the country. mean, my God, we don’t even ask if the client has a job, Michelle. The section on the 10.03, the mortgage application is blank for employment. But you got to do it right.

    Michelle Kesil (08:14)
    Yeah, absolutely. What do you think are like the misconceptions that you commonly bust for people?

    Michael Banner (08:21)
    Well, know, again, the misconceptions are, know, know, grandma died, left me X amount of dollars. I’m going to buy my my first investment home. I don’t even have to have a job. You know, on the the fifth of the month, I had one hundred and sixty two dollars in my checking account. Now I have seventy eight thousand. You know, want to close in 30 days? Well, you know, that’s a misconception to all the advertisements say 30 days seasoning.

    We only have to have the money for 30 days. That’s a little misleading. What it really should say is one full bank statement. Because if if you did bring come into money or make a large deposit on the 10th of the month, the client thinks, well, the 10th of the following month, that’s 30 days. Can we close on the 11th? No, because that month’s bank statement shows the money appearing out of nowhere.

    Now we have to ask where it came from. Now we need to source it. Now we need additional bank statements. Really isn’t 30 days seasoning. It’s one full bank statement, another nuance to prepare. Of course, we do this in 49 states and not New York, which is unusual. Most DSCR lenders are in a handful of states. But again, when working with an experienced loan officer and an experienced lender, the sky’s the limit. And of course,

    Not many lenders, but we do not only one to four units, Michelle, but we do multifamily units, five units and above. We’re closing. I’m personally closing on a on a 10 unit apartment complex ⁓ in February, and it’s DSCR. Now they have to put down a little more money, of course. But what a cash flow. It’s amazing. And I didn’t even need income verification.

    Michelle Kesil (10:41)
    Yeah, amazing. And so when would someone use the DSCR loan versus another type of loan?

    Michael Banner (10:46)
    Is the DSCR loan for people are not receiving

    funds? Well, you normally I would say the DSCR loan is for people that can’t prove their income or they can’t prove their income, but it’s not enough to qualify for their present home, their two car payments, their 2.3 children and an investment home. So normally I would say that’s when we would use the DSCR loan for

    those people because I don’t have to ask your income or what you do for a living. I just need to see your 20 % down in one full bank statement. But even that has changed because of the interest rate environment that we now live in. Michelle, I am actually giving better rates for a DSCR loan with 20 % down than Fannie Mae is doing for a fully documented.

    20 % investment low because I’m sure you know, as all your viewers know, know, owner occupied rates are X. But when it’s not owner occupied, they hit you for the rate. So it’s really amazing. I have people that do qualify and go, what’s the rate? I tell them. And then I say, but I can do a DSCR twice as quick and your rates lower. So it’s very strange out there right now. But what a wonderful environment for investors.

    Michelle Kesil (12:02)
    Yeah, absolutely. And so how does this benefit the investor?

    Michael Banner (12:06)
    Well, it benefits the investor because, let’s face it, everybody wants to be an investor and sometimes qualifying. I do loans for people that have 20 properties. And after they’re done with their depreciation and other tax write-offs, you know, excellent credit score, beautiful residential home. I mean, these are wealthy people, but their tax returns don’t reflect it because they have a great accountant.

    and they have their write-offs and they have their upfront depreciation. So the DSCR loan is for people that don’t want to hand in their tax returns and go through that hassle or are not capable of. It’s both.

    Michelle Kesil (12:44)
    Got it. That makes sense. What other opportunities do you support investors with?

    Michael Banner (12:50)
    Well, of course, you know, again, with American Pacific Mortgage being the ninth largest investor in the ninth largest independent mortgage company in the country, we offer a direct Fannie Mae Freddie Mac. Our rates are staggeringly competitive. So, you know, it’s not that unpopular in today’s world for someone to take their residence that’s worth X amount of dollars and has no mortgage. And we do a cash out refi on their residence.

    because that’s where the tax benefits are. And then they use those funds to buy an investment home free and clear. Of course, we’re a VA lender. We’re very proud of that. We’re a direct VA lender and we love helping our veterans. FHA, we have close to three dozen down payment assistant programs, not for investors, that’s for owner-occupied, but again, for that immense group in our country that are renting a house right now.

    Again, married couple making good money, great credit score. They’re married. They have 2.3 children. They have two big car payments. Life is good, but they can’t save up that 15 or 20 or $25,000 down payment to buy a home for themselves. I’m not talking an investor right now. We have literally three dozen down payment assistance programs to help young borrowers that can afford a house.

    You know, in today’s crazy world, can’t save up that down payment. You know, it’s expensive out there right now to do anything, to take the kids to the movies, God.

    Michelle Kesil (14:23)
    Yeah, definitely that makes sense. I know people are looking for all of the ways to leverage their finances.

    Michael Banner (14:24)
    you.

    Yes, absolutely. there is, you know, I’m my my passion at my hot button is helping people prepare for retirement because we’re all living longer. We’ll talk about that. know, before we go about my podcast, before we sign off, my passion is helping people to prepare for retirement. And they have many vehicles to do that for one case, IRAs, ⁓ annuities, life insurance.

    but there’s no better investment than buying real estate. There just isn’t. I mean, and that’s way it’s always gonna be in this great country. So I love helping people do that.

    Michelle Kesil (15:11)
    Yeah, definitely.

    What do you think people are missing right now when it comes to preparing better for retirement?

    Michael Banner (16:00)
    God, that’s a rough one. And like I said, it’s my most sensitive subject to me on an emotional level. ⁓ They’re missing a lot. I mean, the truth of the matter is, unless you’re in the top five percent, maybe even three percent of this country and you have a seven figure bank account in the millions, preparing for retirement is a double edged We’re living longer than our parents were certainly living much longer than our grandparents. ⁓

    You know, right now in this country, if you live to be 62 and notice, I didn’t say Michelle, be healthy at 62. I just said live to be 62. You have almost a 50 50 chance of making it to 90. And 98 % of this country, and that’s not a number I pull out of thin air, that’s a fact, is not going to be able to retire in their 60s with.

    25 or 30 years cash reserve in the bank. That’s why you see people, I’m 67, look how I’m still working. Life is good, but accumulating wealth when everything is so expensive in the world today ⁓ is very difficult. I think where people are missing is their brother, the rich attorney, or their uncle, the doctor, he’s set for life. You can do that too.

    You can be set for life in your 70s, 60s and 70s if you start preparing in your 40s and 50s. If you buy those investment homes that will build in value and the rent will go up as the balance goes down on the mortgage. If you purchase a long term annuity and you make contributions to it for 20 years and you don’t take it out and it builds tax deferred, if you don’t let your life insurance go.

    if you convert it to whole life insurance with cash value. There’s just so many things, Mr. and Mrs. America, that are working so hard to make their family have a good life. Yes, it may sound or may seem insurmountable in this crazy world that we live, but yes, you can prepare for a very prestigious and luxurious retirement, but you can’t stop preparing in your 60s.

    You got to prepare in your 40s and 50s.

    Michelle Kesil (18:12)
    Yeah, definitely. think that’s important for people to get ahead.

    Michael Banner (18:16)
    Yes. Right now, getting ahead in today’s crazy country and our environment, let’s face it, Michelle, live in, we have our problems right now, but we live in the best country in the history of history. And that’s That’s America. But forget getting ahead. The great majority of this great country right now is trying to get to the end of the month and they make good money. But like I said, between their

    their children and their car payments and little league and dance lessons and maybe a vacation to Disney World or a cruise. They’re very happy at the end of the year that the kids have everything they want. They put a little away in their 401k or their IRA and we had a good year. A lot of people have put saving for retirement or amassing ⁓ assets, wealth.

    A lot of America, I’m going to say more than half of America has said, I’m sorry, that’s out of reach for me. ⁓ I’ll have to kick that can down the road. And right now, my children need this. Right now, my daughter’s getting married. My son’s going to college. ⁓ My parents need help. ⁓ The American dream has gotten a lot rougher the last 20, 30 years in this great country.

    Michelle Kesil (19:28)
    Yeah, I can understand that the prices have definitely risen. Yeah, and so is there a way through like mortgages and loans that people can use this tool in order to become better with their finances and save for their future?

    Michael Banner (19:31)
    Yes.

    Yes, I mean, there’s no doubt it’s just like anything else in the world. mean, if you want to, you know, God forbid, if you have pains in your chest, you go to a cardiologist. you have a problem with your foot, you go to a podiatrist. You have problems with your eyes, you go to an optometrist. You know, if you want to do something in the real estate investment world, work with a great realtor, work with a experienced mortgage person. Again, I have so many.

    I won’t say friends, but acquaintances. Michael, we were going to use you for your mortgage, for the mortgage. But, you know, my wife’s cousin has been a mortgage person for for 20 years. And it would make the holidays real rough if I didn’t use them. And then three weeks later, they’re calling going, this guy doesn’t know what they’re doing. I mean, my God, my closings all goofed up. My closing costs are four thousand dollars higher than he quoted. You know, your home, your residence, your rental home.

    is probably the largest asset and conversely, your largest liability of your life. Do business with somebody you have confidence in. Do business with somebody that has 44 years experience. ⁓ do, you know, build a trust and a bond, you know, with that person like you would with a doctor or a lawyer or your accountant. I mean, again, there’s a lot of money. You sign those papers. That’s it. Thirty years.

    Michelle Kesil (21:11)
    Yeah, absolutely. It’s an important decision to make.

    Michael Banner (21:14)
    Most mortgages last longer than most marriages today. Sounds terrible, but it’s a mathematical fact. It’s crazy. It’s a reality. ⁓

    Michelle Kesil (21:17)
    No.

    Yeah, it’s reality. ⁓

    Awesome. Well, before we

    wrap up here, if someone wants to reach out, connect, learn more, hear about all of the ways that you’re working and serving, where can people find you and connect with you?

    Michael Banner (21:38)
    They can find me anywhere. They Google Michael Banner Mortgages. I’m everywhere. But please feel free to call to email me at OK, ⁓ that’s my easiest place. I look for my email. It’s never off. And then I’m going to ask, I hope all of you to tune in to my weekly podcast, which is on a dozen different platforms, YouTube, Spotify.

    I heart radio, it’s 62 who knew the 62 who knew podcast. And on that podcast, not only do we talk about things like you and I just spoke about Michelle, but again, we talk about the annuities and the life insurance and and I’m not a real estate agent. But if somebody says to me, Michael, I’m in Florida, where I live, or I’m in Washington state or I’m in New Jersey and I don’t know any experienced realtors.

    One of my national sponsors is Remax. They will be able to click on a certain link in my podcast website and they will automatically be connected with an absolute top remax agent in their area. If they go, Michael, I think it’s time we bought an annuity. I’m not going to do that. I’m not an annuity specialist, but through 62 Who Knew’s website, I will connect them with a national expert wherever they live.

    So I hope your viewers will tune in to 62 Who Knew and subscribe to that. And I hope I can help a lot of people have the highest quality retirement they possibly can.

    Michelle Kesil (23:12)
    Awesome. Well, appreciate your time, your story. Thank you for being here.

    Michael Banner (23:16)
    Thank you so much for having me.

    Michelle Kesil (23:18)
    You’re welcome. And for those that are tuning in, if you got value, make sure you have subscribed. We have more conversations with operators like Michael, who are building real businesses and we’ll see you on the next episode.

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