What Should Your Income Look Like for a DSCR Lender?
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5 important things to know about DSCR lender income requirements.
Compared to lenders of conventional loans, any DSCR lender will have unexpected guidelines when it comes to income. The qualifications they need from you, plus the kind of income they need from your property is unlike any traditional loan.
Let’s go over 5 key points about DSCR lenders and income.
5 Things To Know About a DSCR Lender & Income
1. YOUR Income
DSCR loans are best for borrowers whose current income over the last two years doesn’t qualify for either a conventional loan or a loan from a local bank.
If your tax returns are low over the last two years, that’s where a DSCR loan might come in for your rental property.
2. Business History
Many real estate investors are new, so they don’t have two years’ worth of tax returns for their business.
With DSCR loans, the length of your business does not matter. You could have opened the LLC the morning you close on the loan. Banks need your business information because they’re lending based on you. DSCR lenders don’t because they’re lending based on the property.
3. Employment Gaps
In the same vein as the first two items, DSCR loans are great for people who just changed jobs, moved, or haven’t had a continual work history for the past two years.
A conventional bank won’t be understanding about career shifts or gaps in work. But they won’t impact your ability to get a DSCR loan.
4. Investing History
Traditional lenders can be hard on new real estate investors. They want to see past successful projects in order to trust you. DSCR loans, though more designed for investment properties, don’t care about your past real estate investing history.
5. Cash Flow on a DSCR Loan Property
To get a great DSCR loan, the rental property must cash flow. While there are some DSCR loans available for negative cash-flowing properties, you’ll only get the best rates and terms when you have positive cash flow.
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