Debt Service Coverage Ratio (DSCR)
If you’re interested in buying or refinancing an investment property but need flexibility to qualify for financing, consider a Debt Service Coverage Ratio (DSCR) loan.
DSCR loans provide financing based on a property’s cash flow. This makes financing more accessible than standard loans, which base financing on factors such as investor’s personal income and certain property requirements.
What is a DSCR Loan?
There are a handful of options to finance investment property. Loan types often differ based on their qualification requirements and the terms they offer. The best loan for you will depend on your individual needs.
With a DSCR loan you can qualify for a mortgage based on the cash flow you will get from an investment property, such as a rental property. This means you can get financing based on the money you will make from the property, rather than your current personal income.
As a non-QM or (non-qualifying mortgage) a DSCR loan helps property investors get financing with non-traditional forms of income. It allows for more qualification flexibility because it doesn’t have to meet the documentation requirements that the Consumer Financial Protection Bureau sets for standard loans.
This makes investing in property more accessible as you can qualify without using your tax returns, employment verification, etc. It allows for a no-income loan with more flexible qualification requirements for new and experienced investors, while also providing competitive interest rates and terms.
How to Get a DSCR Loan
If you’d like to see whether you qualify for a DSCR loan, connect with us. To get you started, we’ve outlined the steps and qualifications needed to help you understand the process.
The Financing Process
By sharing basic information about your potential purchase or refinance, we’ll work with you to see if a DSCR loan meets your needs and whether your situation qualifies.
As we move through the process we’ll discuss the terms you qualify for and your financing options, as well as request the necessary documentation.
We’re with you through each step, leading to a simple and efficient closing so that you can move forward with your investment.
DSCR Loan Requirements to Meet
These are some of the common requirements often needed to qualify for a DSCR loan. If you have questions about these requirements, we’re here to help.
- We’ll need to know what the expected leverage is for the property, whether the loan is for a purchase or refinance. In many cases, the Loan-to-Value ratio needs to be above 70-75%.
- We’ll consider whether the property is vacant or leased. If leased, we’ll need to know how much and if it’s a short-term or long-term lease.
- You’ll need to provide the annual property tax information for the investment property, as this will be considered when calculating your potential loan.
- You’ll also need to provide annual insurance information for the property for the same purpose.