A Debt Service Coverage Ratio (DSCR) loan is a type of real estate investment loan that qualifies borrowers based on the income generated by the property, not their personal income. Ideal for real estate investors, DSCR loans offer fast approvals, no tax returns or pay stubs required, and flexible underwriting focused on the cash flow of the investment property. If the property's rental income covers the mortgage payment, you may qualify.
Documents Required for a DSCR Loan}
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What is a DSCR Loan?
The Debt Service Coverage Ratio (DSCR) is a financial metric used by lenders to assess a borrower's ability to cover their debt obligations, particularly related to loans. It measures the relationship between a property's operating income and its debt service, including mortgage payments and interest.
DSCR Loans offer several advantages:
DSCR Loans focus on the property's cash flow and its ability to cover debt service. Here's how they typically work:
A good DSCR ratio typically falls in the range of 1.25 to 1.5 or higher. This means the property generates enough income to cover its debt service by 1.25 to 1.5 times or more, providing a cushion for unexpected expenses.
The DSCR is calculated using this formula: DSCR = Net Operating Income (NOI) / Total Debt Service
A DSCR ratio greater than 1 indicates that the property generates more income than required to cover its debt payments.
Unlock the potential of your income-producing property with a DSCR Loan. Contact us today to explore your financing options and leverage the power of a Debt Service Coverage Ratio Loan to grow your real estate portfolio.