DSCR Loans

Get a mortgage based on the cash flow generated by an investment property rather than through proof of income and employment status.

Overview of DSCR Loans

DSCR loans (debt-service coverage ratio) offer a unique type of lending that isn’t based on your regular income or net worth to determine the amount you borrow.

Instead, we calculate the amount of cash flow you’ll receive from the rental income of the property to pay for the outstanding monthly debt. Typically, such properties are 1-4 rental units (with each unit housing a single family) but can be as large as 10 units. You might also hear the term “non-QM” used when describing DSCR loans. This stands for a non-qualified mortgage, which simply means that the lending criteria are different from a conventional loan—it’s based primarily on the cash flow potential of the mortgaged property rather than on your financial situation. Qualification rules and underwriting guidelines allow us to customize your loan specifically catered to your requirements.

How DSCR Loans Work

Until relatively recently, DSCR loans were only available for commercial property. But now they can be underwritten for residential units as well.

The calculation used to determine the size of the loan is made by dividing the monthly rental income minus expenses (known as net operating income, or NOI) by the mortgage payment. This provides you with a ratio, which equals the DSCR. Any ratio higher than 1:20 is likely to lead to approval. Of course, the higher the second number, the better.

Because this calculation is relatively simple and doesn’t require any proof of regular income, tax returns, etc., we can approve the process in a much shorter timescale than for a conventional loan. The assessment only takes that property into account, therefore it’s beneficial for investors who might not meet the criteria for a traditional investment mortgage.

Applying for a DSCR Loan

Our application process is pretty painless. Once you’ve sourced your investment property, you’ll need to accurately detail the financials surrounding the potential rental.

This will include:

The real estate value.
Property income (the monthly rent).
All reasonable property expenses, such as maintenance costs, rent rolls, tax returns, operating statements, etc.

We’ll assess these, determine the property’s NOI, and calculate the DSCR ratio. If the figure is favorable, then the loan will be made available to you straight away. The whole process can take as little as 21 days to complete.

Is a DSCR Loan Right for Me?

DSCR loans are a great way to start or increase your rental property portfolio without providing information about your net worth and/or employment information. For example, those who are:

Self-employed with a complex or short financial income history.
Freelancers.
You’ve reached their credit limit with conventional borrowing.
You don’t wish to provide your employment information.
You don’t have a large amount of liquid capital.