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Also known as the “No-Doc Investor Loan,” it is Ideal for real estate investors, one of the main benefits of a DSCR loan is that a personal income calculation is not required. The lender is instead focused on the cash flow that the real estate investment at hand (or intent to acquire) is predicted to generate. This erases the need to turn in those paystubs and the need for employment verification. Along with these benefits, an investor can come to the closing table and close each loan in their entity’s business name which further allows you to separate personal information from business operations.

Program Highlights:

  • 30-Yr Fixed-Rate
  • Rate Locks Available
  • For Cash-Out Refis, Rate-and-Term Refis, and New Purchases
  • Up to 80% LTV, Cash-Outs Eligible
  • 2.0% Origination Fee
  • No Tax Returns Required
  • 680+ FICO Score
  • Single-Family and 2-8 Unit Residential
  • Eligible Entities: LLCs and Individuals
  • Short-term rental qualified (AirBnB & VRBO)

Email your loan scenario to tommy@soundlendingteam.com, and we will provide you with a detailed interest rate quote with loan terms within 24 hours.   

How does a DSCR Mortgage work?

To qualify for a DSCR loan, the rental income generated by the property must meet or exceed the lender’s coverage ratio requirement. The coverage ratio equals monthly rental income divided by the mortgage payment and typically ranges from 1.0x to 1.5x, depending on the lender and borrower.

For example, if a lender’s debt service coverage ratio is 1.0x and the property produces $3,000 in monthly rent, the maximum mortgage payment permitted is also $3,000.

Because qualifying for a DSCR mortgage depends primarily on the rental income produced by the property instead of your personal income, the application process is streamlined and may take less time than a regular investment property mortgage.

The DSCR program is well-suited for someone who is looking to acquire or refinance an investment property but does not have enough personal income to get approved or does not want to provide their tax, financial, and employment documents.

Loan-to-Value Ratio (LTV)

The maximum loan-to-value (LTV) ratio for purchases is 80% and 75% for cash-out refinances. This is moderately lower than the maximum LTV ratio for a standard single-unit investment property purchase loan but higher than the ratio for a standard rental property refinances. The lower the LTV ratio, the higher your down payment or, for a refinance, the more equity you are required to have in the property.

Minimum Credit Score

The minimum credit score required for a DSCR mortgage varies depending on the lender and other factors but is typically 680, which is similar to the score required for a standard investment property loan.

Down Payments for DSCR Loans

Regarding down payment amounts, the requirement often varies from 20 to 25 percent, depending on the lender. This can save you from throwing a large sum of your wealth into your real estate investment property and instead allows you to invest in more properties at once if you choose. Doing so could put you in an even greater favorable cash flow position which is what you want and what we want for you. 

Borrower Debt-to-Income Ratio (DTI)

Because the DSCR program uses a coverage ratio to determine if you qualify, your personal debt-to-income ratio is not factored into your application. This also means that lenders do not verify your income or employment when you apply for the loan, which reduces the documentation requirements.

Summary

All in all, DSCR Loans are an extremely valuable product that allows you to separate your business from your personal affairs, does not dig quite as deep into personal records, can offer a quicker closing time than other loan products, and requires a lower down payment than other real estate investment ventures. While no loan is seen as flawless, this option is extremely attractive to a real estate investor. We can help you decide if this is the best fit for your situation, give me a call or text at 425-224-5794 if you have any questions. Email tommy@soundlendingteam.com.

The main benefit of a DSCR loan is that it is based on borrower credit and property cash flow, not the borrower’s personal income. DSCR loans are considered to be “low-doc” loans in comparison to conventional loans which require more documentation in order to proceed with the loan.

A conventional loan is often difficult for Real Estate Investors to achieve as they require specific guidelines in order to meet the criteria of Fannie Mae and Freddie Mac. However, a conventional loan is appealing to those who qualify as they may be able to receive a lower interest rate.

Yes, you must have a minimum FICO score of 640. Your interest rate will be determined by your credit score. 

The maximum LTV for purchases is 80%, Cash-Out is 75%. Your LTV will vary based upon your creditworthiness, property location, and the property’s DSCR ratio. 

Yes, there is a 6 months seasoning period for cash-out. There is no seasoning requirement for rate-and-term refinance. 

We offer loans on a wholesale basis from lenders, and therefore can offer the best rates available in the market, making the total loan cost lower for you.