DSCR LOAN PROGRAM FOR INVESTORS
This Loan Program allows buyer to use market rent to qualify rather than using their current income. Provides more flexibility to qualify & build your investment portfolio!
DSCR (Debt Service Coverage Ratio) Loan Program looks at the cash flow generated from an investment property to qualify for a mortgage instead of personal income. Depending on your credit score, your downpayment can range anywhere between 15-25% down.
​​
What is the Debt Service Coverage Ratio (DSCR)?
​Before learning the ins and outs of a rental property loan, it’s beneficial to understand the calculation and purpose of the debt service coverage ratio. Lenders use this ratio to determine if you have sufficient funds to repay your debt. The lender will use this information to decide how much money to lend when requesting a loan or refinancing an existing one.
DSCR is the ratio of income generated for every $1 owed to the lender. The higher the ratio is, the more net operating income is available to service the debt. For example, a 1.25x DSCR reflects that the asset generates $1.25 for every $1 owed.
Put simply, the DSCR looks at all the monthly debt payments associated with the property, including loan payments, and compares them to the property’s monthly revenue. The lower the DSCR, the greater the risk you may have to go out of pocket to pay the loan should the property sit vacant, or the operating expenses turn out to be higher than expected.
DSCR calculation for a single-family rental property
A simple way to calculate your DSCR and measure your cash flow is to divide the monthly rent by the PITIA (principal, taxes, interest, insurance, and association dues). The resulting ratio lends insight into your ability to pay back the loan based on your property’s monthly rental income.
​
​​
​
​
​
​​
​
​
​
​
​
​
​​
​Qualifying for a DSCR loan
When qualifying for a DSCR loan, the lender considers several factors, including the borrower’s credit score, available down payment, and the debt-service coverage ratio of the property. Typically, the credit score dictates the interest rate, and leverage is determined by credit score and DSCR combined. DSCR measures the asset’s ability to pay the property’s mortgage and expenses — so the higher it is, the more leverage the investor can get, which means less out-of-pocket cash at closing.​​​​​
​
​
​
Additionally, eligible (√) and ineligible (X) property types for a DSCR loan include: ​
​​
​​
​​​​
​​
​​​​
​​​​
​​​​
​​​​
​​​
​​​
​​​
​​​
​​​
​​
​​
​​
​​
​​​​​
