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DSCR Investor

A typical Non-QM Debt Service Coverage Ratio (DSCR) loan allows a borrower to qualify for a mortgage based on cash flow generated from an investment property – through a rental, for example – as opposed to their personal income. A calculation generates a debt-to-income ratio and the higher the ratio, the better.

How is DSCR calculated?
 The DSCR is calculated by taking net operating income and dividing it by total debt service (which includes the principal and interest payments on a loan). For example, if a business has a net operating income of $100,000 and a total debt service of $60,000, its DSCR would be approximately 1.67.
What is a good DSCR for rental property?
 A good rule of thumb is to keep the DSCR over 1.3 to keep your margins from being too thin, and the overall quality of the investment high. The closer you are to breaking even, the less cash-flow you’ll obtain from the property – thus making it a riskier investment.

No Ratio – No minimum DSCR. A Smart Way to Finance Your Real Estate Portfolio.

SELECTIVE LENDING SPECIALIZES IN DSCR NON-QM FOR INVESTMENT PROPERTIES

  • NO RATIO! (NO minimum DSCR) Limited restrictions.

  • No income and no job required

  • Transfer appraisals accepted

  • Gift funds allowed after 10% from borrowers own funds

  • Only 30-days of assets docs. for closing funds and reserves

  • First-time investors: Up to 75% LTV

  • Cash out can be used to meet reserve requirements

  • Only one appraisal required up to $2M

  • Closed in LLC

  • 30-year fixed, SOFR ARMs 5/6 & 7/6 with Interest-Only options

  • Purchase up to 80% LTV and cash-out up to 75% LTV

  • SFR, condo, 2-4 units and short-term rentals

ANY QUESTIONS? WE’RE HERE. CONTACT US TODAY (949) 603-7683

What is DSCR and how is it calculated?

DSCR is the ratio of Net Operating Income (NOI) to Debt Service (the mortgage payments).

As an example, the borrower has an investment property in mind that has a monthly lease income of $4,000 and a monthly PITI debt of $3,200. The DSCR in this example is 1.25. This means the property generates 25 percent more income than is needed to pay the debt obligation, therefore generating positive cash flow. This valuation provides the lender with a quick tool to break down the borrower’s ability to sustain and pay off the debt obligation on a real estate investment.

“What is so great about our DSCR product is that it offers no minimum DSCR, with some restrictions,” Nick says. “Most lenders require a minimum DSCR of 1.2. Our DSCR has no ratio.

What is the appeal of a DSCR loan?

One of the big benefits of a DSCR loan is that a personal income calculation or employment is not required. The lender is interested in the cash flow the subject property is calculated to generate. Our DSCR features:

  • No income verification – qualify on subject property income

  • No employment required

  • No leases are required to be listed

  • No lease required if not rented