Why Your DSCR Loan Will Get Accepted

Get your DSCR loan accepted today! DSCR loans are based off of LTV, which is 75% for rate and term and 80% for purchase. However, you need to calculate the break even point as well before purchasing the property. The break even point can limit how much you can get out of the property, as well as requires you put more money in at purchase. Let’s take a closer look at the numbers to see how you can get your DSCR loan accepted! 

What do you need to know before purchasing a property?

Investors use the BRRRR strategy for rental properties and creates an easy way to build a portfolio. However complications arise when refinancing the property. While investors expect to refinance out at 75% to 80%, it doesn’t always work as planned. This is due to the fact that the DSCR ratio comes into play. The DSCR ratio limits the amount that you can get out of the property. That is why it is important to know your numbers before purchasing the property or prior to refinancing. By calculating the break even point on your DSCR ratio you will create the cash flow you need to succeed.

Example: One property qualifies and one does not.

It is important to take everything into consideration to see whether or not the property qualifies. The numbers that you need to consider include taxes, property insurance, flood insurance (when applicable), and HOA (when applicable). Remember, in order to qualify for a DSCR loan the rent needs to be greater than or equal to the expenses. To demonstrate the break even point today we will compare two properties that have the same property value, loan amount, and monthly payment.

Value of the property	Loan amount	Monthly payment
$200K	$150K	$1,050
	Property A	Property B
Taxes:	$1,800	$3,600
Property insurance:	$1,200	$3,600
Flood insurance:	$0	$0
HOA:	$0	$0
Total	$3,000	$7,200

In conclusion,

Always run the numbers prior to purchasing the property to find the break even point.  The break even point affects your ability to refinance the property later on. Keep in mind that every property will be different and every location will be different as well.

Do you have any questions or want to run through some numbers reach out to us! We are happy to work through the numbers with you to ensure that the property will be a good investment.

Watch our most recent video to find out more about Why Your DSCR Loan Will Get Accepted!