Long-Term Rental Loans Using 'DSCR' Debt Service Coverage Ratio
Call it what you want, private, hard money or asset-based loans; NSS Lending can help you finance the purchase of residential and commercial real estate based on the debt service coverage ratio or DSCR; not your personal income. Many regions of the country, home prices have risen sharply making homeownership unaffordable for many potential buyers. More than ever, many people are choosing to rent a home instead of purchase. That is good news for the rental loan market.
How much can I finance with a DSCR loan?
Finance up to 80% of the purchase price
Minimum DSCR 1.0
Minimum credit score 680
No deferred maintenance
Market rent will be used for vacant units
Minimum loan amount >$75K
30-Year fixed rate
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What is the minimum loan amount for a DSCR loan?
$50,000 is the minimum loan amount for a DSCR. (Lower with exception).
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
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'
5+ Multi-Family
Starting at $100K
Up to 75% LTV
Minimum credit score 650
Must Be 70% occupied
No deferred maintenance
What credit score do I need to qualify for DSCR Loan?
With a FICO score of 600, you can get up to 60% of the appraised value, but once you fall below 600, then the most you can access is 50% of the appraised value.
Commercial
Conventional and
SBA Loans
Starting at $100K
Minimum credit score 650
70% occupied or owner ocupied
No deferred maintenance
(SBA loans require full documentation)
