Why Consider A DSCR Loan?
A DSCR loan is great for real estate investors because it looks at the rental income from the property instead of your personal income. This makes it easier to get a loan for investment properties without needing to provide a lot of extra financial details.
DSCR Loans: What You Should Know
The investment property’s cash fow is the main component of a DSCR loan. This helps lenders and investors figure out whether the property’s net operating income (NOI) will cover the debt obligations of the loan. DSCR is the ratio used to measure cash flow, and it can be worked out by dividing the NOI by the amount of debt, on an annual basis.
Typically, lenders who provide DSCR Loans are looking for a ratio of 1.2 or more. Any debt service coverage ratio over 1 means that the debt can be covered by the income of the rental property. A ratio of 1.2 or higher means that borrowers will be able to cover their debt and have money left over from the property’s income. In other words, the higher the debt service coverage ratio, the lower the risk for DSCR lenders.
