DSCR Loan Programs
The DSCR (Debt-Service-Coverage-Ratio) Loan or debt service coverage ratio is the relationship of a property’s annual net operating income (NOI) to its annual mortgage debt service (principal and interest payments).
Calculating the debt service coverage ratio
The DSCR calculation is rather simple. A business’s DSCR is calculated by taking the property’s annual net operating income (NOI) and dividing it by the property’s annual debt payment. The DSCR is typically shown as a number followed by x.
Key Features
Qualify based on the property’s rental income instead of personal income or tax returns
Minimum DSCR typically required is 1.1 to 1.25 (property’s rental income must be at least 10-25% higher than the mortgage payment)
Minimum credit score requirements usually start at 660-680
Down payment requirements generally range from 20% to 25%
Available for a variety of property types, including single-family homes, duplexes, and multi-family properties
No limit on the number of investment properties you can finance
Both fixed-rate and adjustable-rate loan options available
Eligibility Requirements:
- Property must be an income-producing investment property (not a primary residence)
Property’s rental income must meet or exceed the lender’s minimum DSCR requirement
Borrower must meet minimum credit score and down payment requirements
Most lenders do not require personal income verification or employment documentation
Borrower must have sufficient reserves, as required by the lender
