WHAT IS A DSCR LOAN?
DSCR loans are loans focused on the rents from a rental property and the credit worthiness of the borrower.
DSCR LOAN REQUIREMENTS.
These loans are great for real estate investment rentals/holds. Unlike traditional loans that require massive underwriting requirements the DSCR loan only looks at 3 items.
- Will your current rents cover the full cost of the monthly obligations. This includes your mortgage payment, property taxes, property insurance and HOA. If your monthly rental rate at least covers all these costs that is all the income requirements needed.
- Your credit score. Typically, your credit score will need to be at 680 or higher but there are options at lower LTV’s if your credit score does not hit the mark. (Here are some tricks to get that credit score up quickly).
- The LTV of the loan. Most DSCR loans max LTV’s will be set at 80% for purchase and rate and term refinances and max out at 75% LTV for cash out refinances. LTV’s can go 5% higher with the right factors but expect to pay a higher rate.
GOOD TO KNOW…The rental property does not need to be rented for the purchase and or refinance. The underwriting will be based off the current market rents for properties in your area.
DSCR LOANS AND SHORT-TERM RENTALS.
There are plenty of options using DSCR loans for short term rental purchases and refinances.
GOOD TO KNOW…Not all DSCR loans and companies will allow income from a short-term rental/Airbnb unless you have 2 years history of rental income as a STR. Short term rentals can use the DSCR loan program but may need to qualify with the typical long term rental rates in the area.
DSCR Loan programs for negative cash flowing properties.
If your rental property is currently not cash flowing no problem. There are DSCR loans that will allow negative cash flowing properties. These loans typically come with a lower LTV and higher costs.
DSCR loans come in many shapes and sizes so that is why we have several sources for our loans. We want to provide options for those looking for the loan that fits their current needs.
To apply for a DSCR loan please follow this link.
If you have any question regarding the DSCR loans you can email us at email@example.com or call us at 303.539.3000.
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