DSCR Loan
A DSCR Loan is a mortgage loan for a residential income-producing property. It is primarily based on the “Debt Service Coverage Ratio” or the cash flow of the property, rather than the borrower’s income.
DSCR Loans are for investors in residential real estate rental properties and are perfect for investors in many diverse situations. Anyone from a first-time real estate investor to a seasoned pro looking to scale a portfolio can use DSCR Loans. The beauty of DSCR Loans is that they are a flexible solution for investors with an easy qualification. This is in contrast to conventional financing which has to follow the rigid and strict rules handed down by the agencies such as Fannie Mae and Freddie Mac.
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WHAT IS AN INVESTMENT PROPERTY?
An investment property is owned but not occupied by the borrower. Investment occupancy is allowed on 1-8 family dwellings (including condominiums and PUDs).
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DSCR
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Buyers are approved using prospective monthly rental income rather than their current income
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Finance up to 20 properties
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Loan amounts up to $3.5M
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Eligible for short-term and long-term rentals
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Up to 80% LTV
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Low reserves requirement — as little as 3 months' needed
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Can be closed in an LLC (Limited Liability Company)
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Credit Scores as low as 620
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Good for Purchase, Cash-Out, or Rate & Term
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First Time Investors allowed
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ITIN/Foreign National
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Eligible Property Types for a DSCR Loan
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Single Family Dwelling
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2-4 Unit Multifamily Dwelling, subject to eligibility restrictions
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Warrantable condominiums
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Planned Unit Developments
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Condo Hotels
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Mixed Use
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Who Benefits From A DSCR Loan?
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Self-employed or Freelance people looking to invest in real estate
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People who invest in real estate with partners or a team
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Investors pursuing niche strategies like Short Term Rentals or the “BRRRR Method"
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DSCR Loans have become such a popular and successful loan product because they combine the easy and non-burdensome documentation requirements with responsible and reasonable underwriting requirements. DSCR Lenders require a small amount of documents, and use common sense, requiring only what is necessary and reasonable to qualify for the loan.