How to Qualify For A DSCR Loan
It's easy! A debt service coverage ratio loan or DSCR loan for short is based on the premise that the rental income on the investment property you want to purchase will cover the loan payment or PITIA. This is a no income verification mortgage; no tax returns & no pay stubs. The only thing that matters is that you have enough money for the down payment and closing costs.
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PITIA Definition
(P) Principal: The money you pay back to lower your loan.
(I) Interest: The fee the lender charges you to borrow the money.
(T) Taxes: The property taxes you pay to local governments.
(I) Insurance: Homeowner, flood, or mortgage insurance that protects the property.
(A) Association dues: Fees for your neighborhood or condo group, if you have one.
DSCR Formula Calculation
DSCR =
Net Operating Income
Principal, interest, taxes, insurance & association fees (if applicable)
Total Debt Service 'PITIA'
How Much Can I Finance With a DSCR Loan?
Finance up to 80% of the purchase price
Starting at $50K
Minimum DSCR .75
Minimum credit score 620
No deferred maintenance
Market rent will be used for vacant units
30-Year fixed rate
Alternatively, you can finance up to 85% of the purchase price of the property, if...
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The property is a single family home, condo, townhome or 2-4 units
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Your credit score is >720
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You have owned two or more rental properties for 24 months
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The DSCR is >1.35
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Loan is >$100K
You can finance up to 90% of the purchase price of the property, if ...
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The seller (or anyone for that matter) is willing to finance a 2nd position lien for a minimum of 3 years for up to 45% of the value of the property. You would be required put down a minimum of 10% plus closing fees.
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The property is a single family home, condo, townhome or 2-4 units
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Loan is > $75K
What types of properties qualify for DSCR loans?
You can use a Debt Service Coverage Ratio (DSCR) loan to finance a wide variety of investment properties, including:
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Residential: Single-family homes, 2–4 unit properties, townhouses, and condos (warrantable & non-warrantable)
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Multi-Family & Commercial: 5+ unit multi-family buildings, mixed-use properties, and commercial real estate
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Specialty & Vacation: Condotels, mobile homes, and both long-term and short-term (Airbnb/VRBO) rentals
5+ Multi-Family & Mixed-Use
Starting at $100K
Up to 75% LTV
Minimum credit score 650
Must be 70% occupied
Minimum DSCR 1.0
No deferred maintenance
DSCR Loans For Commercial Property
Starting at $100K
No minimum credit score
No deferred maintenance
30-Year fixed rate
What is the minimum credit score I need to qualify for a DSCR loan?
With a credit score of 600, you can get up to 60% of the appraised value. 50% LTV if your credit score falls below 600.