Debt Service Coverage Loan
Debt Service Coverage Loan
A Debt Service Coverage Ratio (DSCR) loan is a valuable tool for real estate investors seeking to expand their portfolios without the hurdles of traditional loan requirements. This type of non-QM loan is specifically designed for investors who may not qualify for conventional loans due to their unique income situations, often lacking traditional income verification like tax returns or pay stubs.
What is a Debt Service Coverage Loan?
A DSCR loan is tailored for real estate investors. Instead of relying on income verification, lenders use the debt service coverage ratio to assess a borrower’s ability to repay the loan. This method streamlines the approval process, making it an ideal option for those who can’t meet the criteria of conventional loans due to the nature of their investments and income.
Who is a DSCR Loan for?
- Investors without Traditional Income Documentation: Ideal for those who cannot or do not want to provide employment details, tax returns, payslips, or W2s.
- Self-Employed Borrowers: Especially beneficial for self-employed individuals with complex or irregular incomes.
- Experienced Investors: Suitable for those who own multiple properties and have reached the traditional credit limit on conventional loans.
DSCR Loan Requirements
- Credit Score: A minimum credit score of 680 is typically required, with better rates available for higher scores.
- Down Payment: Most lenders require a minimum down payment of 25% of the property’s purchase price.
- DSCR: A minimum debt service coverage ratio of 1.2, meaning the property’s rent must exceed its expenses.
- Property Value: Many lenders set a minimum property value of $150,000.
By meeting these requirements, investors can leverage DSCR loans to acquire, hold, or trade investment properties, offering a flexible and efficient financing solution.
MORTGAGE HOUSE USA
We bring a customized, unique approach to mortgages. Our lending solutions use the perfect hybrid of human-driven insights and technical prowess to process loans faster and significantly reduce costs.
