The Two Real Refi Paths

When the balloon date approaches on a seller-financed note, you have two practical refi lanes: an online DSCR lender or a local community bank. Each fits a different deal profile. Understanding the tradeoffs lets you pick the right one before you close the acquisition, so you are not scrambling at month 60.

DSCR Lender - Fast, Standardized, Limited

DSCR lenders (Visio, Kiavi, Lima One, CoreVest, Griffin) underwrite the property, not the borrower. They look at rent versus PITIA. If the ratio works, the loan closes regardless of your W-2 income or tax returns.

Strengths:

  • 30 to 45 day close
  • No personal income verification
  • Programs from 4-unit residential up to 20-unit multifamily
  • LLC borrower friendly
  • Standardized process, predictable outcomes

Limits:

  • Title must be in your name at application. Land contracts and other non-deed structures will not work.
  • DSCR usually 1.0 to 1.2 minimum, sometimes 0.75 for high-credit borrowers
  • LTV typically 75 to 80 percent purchase, 70 to 75 percent cash-out refi
  • Rates 1.5 to 2.5 points above conventional
  • Some lenders impose 5-property maximum across the lender

Community Bank - Slow, Personal, Flexible

Local community and regional banks make portfolio loans. They keep the loan on their balance sheet, so they have flexibility on terms a securitized lender does not.

Strengths:

  • Will often refinance non-standard structures (land contracts, partnership splits, scattered-site portfolios)
  • DSCR flexibility (some banks accept 1.10 if the borrower is strong)
  • Higher LTV available (up to 80 percent on stabilized assets)
  • Lower interest rate than DSCR (50 to 100 basis points cheaper typically)
  • Relationship-based: a strong banking relationship gets you more deals

Limits:

  • 60 to 120 day close
  • Full personal financial statement, tax returns, K-1s required
  • Tied to local presence (you usually need to bank there)
  • DTI and personal income matter
  • Loan committee may decline a deal that fits underwriting on paper

Which Fits Which Deal

DSCR is right when:

  • The property is 1 to 4 units residential or small multi (5 to 10 units)
  • Title transferred at acquisition (you are on the deed)
  • DSCR will be 1.20 plus at refi
  • You want to close quickly
  • You have multiple properties and need a scalable, lender-agnostic process

Community bank is right when:

  • The property is 5-plus units multifamily or commercial
  • You have a complicated ownership structure (LLC with multiple partners)
  • Your personal DTI is high but the property is strong
  • You want a relationship that will fund future deals
  • You can wait 90 days

The Sequencing Strategy

Many operators do both:

  1. First 1 to 3 deals: DSCR refi for speed and simplicity
  2. Once you have a 3-property track record: build a community-bank relationship for deals 4-plus

Community banks reward operators with a track record. Walking in with a portfolio of 3 successful deals (acquisition, stabilization, on-time payments) gets you a different reception than walking in cold.

Documentation You Will Need

Both lenders require:

  • 2 years personal tax returns
  • 2 years business tax returns (if applicable)
  • Last 3 months bank statements
  • Current rent roll
  • Current trailing-12 income and expense statement
  • Property tax bill
  • Insurance declarations page
  • Borrowing entity organizational documents (LLC operating agreement, certificate)
  • Photo ID, SSN

DSCR lenders may waive some items based on the strength of property cash flow. Community banks rarely waive anything.

Common Refi Surprises

  • **Appraisal comes in low.** Common in markets where comps lag the actual transaction prices. Plan a 5 to 10 percent appraisal cushion in your underwriting.
  • **NOI does not match what you projected.** This is why stabilization timing matters. If you refi 6 months too early, the NOI is below underwriting and the loan amount drops.
  • **Loan committee asks for more equity.** Community banks may require 25 to 30 percent equity even when the property would support 75 percent LTV at a DSCR lender.
  • **Title issues surface during refi.** A title insurance policy from acquisition catches most issues, but small problems (forgotten easements, missed mechanic's liens) can delay closing.

When To Start The Refi Process

12 to 18 months before the balloon date. Not 6 months. Not 3 months. Give yourself runway for appraisal challenges, document gathering, and a backup plan if the first lender declines.

Operators who run their seller-financed deals to balloon-minus-90-days as their refi target consistently get caught short. The successful operators target balloon-minus-12-months as their refi close date, leaving slack for surprises.