Texas is one of the most active markets for DSCR lending given the volume of real estate investor activity. It also has unique state-law restrictions on cash-out lending that affect how DSCR refinances work for investment properties. MLOs in Texas need to understand these rules before positioning a DSCR cash-out refi for an investor client.
Texas Article 16 Section 50(a)(6) Restrictions
Texas has constitutional restrictions on home equity lending under Article 16, Section 50(a)(6) of the Texas Constitution. These restrictions apply to cash-out refinances on primary residences in Texas. For investment properties, these homestead restrictions do not apply in the same way, but DSCR lenders with Texas programs must ensure their documents and processes are compliant with applicable Texas law.
Investment Property DSCR in Texas
- ✦Investment property DSCR loans in Texas are not subject to the 50(a)(6) homestead restrictions because the property is not a primary residence
- ✦Cash-out DSCR refis on Texas investment properties can be structured at up to 75 LTV at most DSCR lenders
- ✦Some lenders impose additional overlays on Texas properties due to state-level documentation requirements
- ✦Title companies in Texas must be licensed by the Texas Department of Insurance, and the closing process may take longer than in states with attorney-closing systems
Lender Availability in Texas
- ✦Major DSCR wholesalers including Angel Oak, A&D Mortgage, and Visio Lending operate in Texas
- ✦Some lenders with concentration limits may slow Texas submissions during periods of high Texas portfolio exposure
- ✦Local community banks and credit unions in Texas sometimes offer portfolio investment property programs that compete with wholesale DSCR on rate for established relationships
Aria can walk through DSCR lender availability and Texas-specific program requirements for any investor scenario. Ask at vicariointel.com.
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