The Debt Service Coverage Ratio loan makes financing investment properties much easier for real estate investors.
DSCR is a nontraditional loan that does not require tax returns nor the verification of income to qualify for a mortgage. Instead, a property’s projected cash flow is used to determine loan eligibility.
Take the gross rents of a property and divide it by the monthly mortgage payment (principal, interest, taxes, and insurance). The result is a percentage that is used to determine an investor’s ability to repay the loan. This calculation is called the “debt service coverage ratio,” hence the namesake, and is why income does not need to be verified.
Less documentation makes the underwriting process significantly easier.
Since DSCR is an alternative solution engineered specifically with real estate investors in mind, it has more features besides simplifying the lending process.
Some other benefits of a DSCR loan are:
- Finance up to 20 properties
- Can close in a business name (e.g., LLC)
- Up to $2.5 million loan amount
- Interest-only options available
For real estate investors and self-employed borrowers, the DSCR program might be the ideal solution for those who have previously experienced discouraging loan processes.
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