This blog will layout the main key factors of a DCSR loan and how you as an investor can use this for your future projects.
As a real estate investor, you can avoid high rates and high points of private loans, lengthy approval processes, and strict lending criteria with a debt service coverage ratio loan, which is a type of no-income loan. Qualify for a loan based on your property’s cash flow, not your income.
Securing a debt service coverage ratio loan can help you expand your investment portfolio much easier and faster when done with the right lenders. For more information you can call Gold Bridge Capital Solutions at 916-236-5075 or 855-501-8725.
What Is a Debt Service Coverage Loan?
A DSCR loan is a type of non-QM loan for real estate investors. Lenders use a DSCR to help qualify real estate investors for a loan because it can easily determine the borrower’s ability to repay without verifying income.
How Does a DSCR Loan Work?
Because real estate investors write off expenses on their properties, some may not qualify for a conventional loan. The debt service coverage ratio loan allows these individuals to qualify more easily because they don’t require proof of income via tax returns or pay stubs that investors either don’t have or that don’t represent their true income due to write-offs and business deductions.
What are the benefits of a DSCR Loan?
- Potentially quicker closing times
- No income or job history verification required
- No limit on the number of properties
- Loan amounts up to $5,000,000
- Unlimited cash out
- As little as 20% on down payments
- Minimum credit score required
- Interest-only loan option available
- Suited for new and seasoned real estate investors
- Both long-term and short-term rentals are eligible (Airbnb, VRBO, etc.)
- No reserves required on cashout loans, 6 months required on all other loans unless the DSCR ratio is less than 1.
Frequently Asked Questions
Do you need a down payment for a DSCR loan?
Most Lenders will expect you to be able to make a minimum 20% down payment
Is a DSCR loan a commercial loan?
Historically these loans only applied to commercial properties but recently asset-based lenders have started using these loan as a way to underwrite and approve loans for 1 to 4 unit residential investment properties.
What is the minimum FICO score required for any of our investors for a DSCR loan?
The minimum credit score required for a DSCR mortgage varies depending on the lender and other factors but is typically 640, which is similar to the score required for a standard investment property loan.
How is DSCR calculated?
DSCR is calculated by dividing net operating income by total debt service. Total debt service includes interest and principal on a company’s lease, interest, principal, and sinking fund payments. Click HERE > to Read More About How To Calculate Your DSCR Ratio.
How do I use DSCR to calculate my loan?
The DSCR is calculated by taking the net cash flow divided by the annual debt-service payments at the requested loan amount. If the net cash flow is insufficient to cover the requested loan at the target DSCR, then the loan amount will be constrained by the minimum DSCR. Click HERE > to Read More About How To Calculate Your DSCR Ratio.
Does a DSCR loan need appraisal?
If you are seeking a DSCR loan to purchase property an appraisal with rental survey is ordered. The rental survey tells the lender how much rent is to be expected based on rental comparables. To use for a refinance will also require an appraisal with rental survey.
Think You Want To Inquire In a loan? Contact us Today for more questions or concerns.
Gold Bridge Capital Solutions
P: 916-236-5075 or 855-501-8725
Start the Application Process and let us get you the loan you need > https://app.loantuitive.com/goldbridgecs