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).
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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
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Qualify based on the property’s rental income instead of personal income or tax returns
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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)
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Minimum credit score requirements usually start at 660-680
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Down payment requirements generally range from 20% to 25%
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Available for a variety of property types, including single-family homes, duplexes, and multi-family properties
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No limit on the number of investment properties you can finance
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Both fixed-rate and adjustable-rate loan options available
Eligibility Requirements:
- Property must be an income-producing investment property (not a primary residence)
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Property’s rental income must meet or exceed the lender’s minimum DSCR requirement
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Borrower must meet minimum credit score and down payment requirements
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Most lenders do not require personal income verification or employment documentation
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Borrower must have sufficient reserves, as required by the lender
