Dear Friends,

Here is a big picture overview on DSCR financing for your rental properties.

DSCR stands for DEBT SERVICE COVERAGE RATIO. This loan type allows real estate investors to buy, refinance or cash out of their rental properties. 

DSCR loans are qualified based on the borrower’s credit and the rental property income.

One of the big benefits of a DSCR loan is that the borrower’s income is not taken into consideration and the outstanding debt is not reported to credit agencies.

In contrast to a conventional loan that takes into consideration borrower income and tax returns, A DSCR loan is easy to qualify for. If the rental income covers the mortgage payment, taxes and insurance, a borrower with 680 or better credit can qualify!

The Debt Service Coverage Ratio is determined by dividing the rental income by the mortgage payment, taxes and insurance.

Loan Terms Overview

• DSCR loans provide 30 year terms with both fully amortized and Interest Only Options. 
• Loan amounts vary from $ 75,000 to $2,000,000
• Prepayment options from 0-5 years.
• Leverage – Up to 80% LTV on purchase and refinance. Up to 75% LTV on cash out.
• Minimum DSCR Ratio 0.75
• Qualify using market rent. Market rent is determined by an appraiser.
• Seasoning requirements- Cash out after 90 days.

Property Characteristics Overview

• 1-10 unit residential properties.
• The property must be in good rentable condition.
• Rural properties are limited to 65% LTV

Rental Income Overview

• Market rent is determined by an appraiser and reflects the local long term rental market.
• You can qualify if the property is vacant! and there is no seasoning requirement for tenants.
• Short term and Mid term rentals require at least 6 months evidence of income.

We hope this gives you a big picture overview on DSCR loans. If you have more questions, hit us up!

Here to be a resource to you!