A DSCR loan is a type of mortgage that qualifies borrowers based on the income (or estimated income) generated by the investment property (e.g., rental income) rather than the borrower’s personal income. The key metric is the Debt Service Coverage Ratio (DSCR).

It’s calculated by dividing the property’s total rental income by the total mortgage payment. If the DSCR ratio is 1 or higher, the pricing is very good. If it falls below 1, you can still do the loan, but it often requires a hit in pricing or a larger down payment.

We have loan options even for non cash-flowing properties. These are called no-ratio DSCR loans. They usually require a larger down payment and good credit.

DSCR loans can be used for investment properties like single-family homes, multi-family units, condos, townhomes, or even short-term rental properties like vacation homes (Airbnbs).

No. DSCR allows for a simple process for real estate investors requiring no income or employment check. It is based on credit, assets and the properties cash flow. If you would like to look at doing a full documentation process instead of DSCR, let us know and we can review your conventional options.

DSCR rates can be right in line with conventional investment property financing depending on the property. We have certain programs that are below conventional loan pricing right now. In order to get best pricing on a DSCR loan, it does require a prepayment penalty.

No, not every DSCR needs to have a prepayment penalty but it will affect the pricing of the deal. You can take anything from 0 prepayment penalty to a 5 year prepayment penalty. The penalty is usually 5% of the amount that you payoff early. Investors that plan on holding the home for a while and not refinancing often take a 3-5 year prepayment penalty to maximize cashflow.

We do same day processing and UW turn times on most loans. We have closed as quickly as 7 business days, and generally close within 10-14 business days. The quicker that you can provide documentation, the quicker we can close.