Is a DSCR Investor loan right for you?
DSCR loans have many advantages including:
- Different eligibility requirements:Â DSCR loans use the rental income from a property, rather than your income to qualify. This means that you can buy an investment property even if your income normally would make you ineligible!
- No limit to the number of loans:Â There is a limit to how many rental properties you can buy with Conventional mortgages, but you can generally take out as many DSCR loans as you want!
- Quicker closing:Â DSCR loans may have quicker closing times than Conventional mortgages because of simplified documentation.
- No employment verification:Â Because your income is not used to qualify for a DSCR loan, there is no employment verification required.
Benefits of a DSCR Investor loan
A debt service coverage (DSCR) loan is one that qualifies you through an investment property’s cash flow rather than your income. DSCR loans — also known as investor cash flow loans — are frequently used by real estate investors to qualify for mortgages and buy investment properties.
Rather than looking at your income, we consider the expected monthly rent from the property. And instead of using the DTI to determine eligibility, we look at the DSCR.
DSCR Investor loan eligibility requirements
While DSCR loans may not have the exact same requirements as Conventional mortgages, there are still guidelines real estate investors will have to meet to qualify.
Unlike Conventional mortgages, DSCR mortgages are not backed by entities like Fannie Mae and Freddie Mac. Therefore, there are no standardized requirements. However, there are a few things that we will look at.
- DSCR:Â Generally speaking, most lenders require a DSCR between 1 and 1.5 to qualify for a DSCR loan, with the most common minimum requirement being a DSCR of 1.25. We go as low as zero!
- Credit score: Each lender will require a specific credit score, with minimum requirements typically ranging from 620 to 700. We go down to 620.
- Down payment: Most DSCR loans have a maximum LTV of 80% — you will need a down payment of at least 20% to qualify. We offer LTVs up to 80%!
- Cash reserves:Â Like other investment properties, DSCR loan lenders require a certain amount of cash reserves, often equal to six months of payments. We only require 3 months of reserves!
- Loan amount:Â The maximum they can borrow for a DSCR loan depends upon the lender, but many financial institutions offer loans up to $2 million. We offer a maximum of $2.5 million!
- Prepayment penalty:Â Unlike Conventional loans and typical investment property loans, many lenders charge prepayment penalties on DSCR loans. We can offer up to NO prepayment penalties!
Property eligibility. DSCR loans can be used for investment properties with one, two, three, or four units. In certain cases, we have been able to approve up to 20 units!
