Use your Investment Property to qualify for a DSCR Loan
A DSCR, debt service coverage ratio, loan is a type of loan that analyzes the investment property's expected rental income to cover debt obligations rather than meeting requirements based on personal income, debt, or employment verification. A DSCR is a non-QM loan allows investors to qualify for financing based on the property's cash flow.
Qualifying for a DSCR is dependent upon the property generating enough rental income to offset the mortgage payment plus any other expenses associated with the investment property. The debt service coverage ratio is calculated by dividing the net operating income of the investment property by the debt obligations. A debt service coverage ratio of 1.0 indicates the investment property is generating sufficient income to cover the mortgage payment and expenses at minimum.
Basic requirements in addition to the DSCR Ratio ≥1 include a minimum 620 credit score, 20-25% down payment, a property appraisal and 1007 rent schedule for single-family houses or Form 1025 for 2-4 unit properties in order to analyze the property value and fair market rent.