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What is DSC???

By
Mortgage and Lending with AMERICAN CASH SOLUTIONS INC

DSC?  What's that?  More to Come on this in a few hours today!!!<--------yep that is what I posted yesterday and here I am ready to make good on this blog.  DSC is Debt Service Coverage used more commonly for construction loans.  The generally accepted DSC is 1.25     The .25 is the important part of this number.  .25 is actually the percentage of net income that must COVER the future payment of the loan that you want on the building.  If DSC is 1.25 then net income must be 25% greater than the future payments of the building.

Now, many of you are aware that on the residential side their is a formula called DTI, aka Debt To Income Ratio("aka" does not imply DTI has a criminal record-in fact DTI works hard every day aidng and abbeting underwriters across America in determining if the consumer qualifies to buy a home).  FHA has 2 ratios, front end and back end DTI ratio.  Conforming aka Conventional aka Prime aka FannieMae loans also have front end and back end ratios.  Subprime aka bad credit loans typically have one ratio-usually 1.5 or 50% of income.  DTI is calculated on a monthly income schedule.  This is important to bring up because one of our major lenders that does commercial stated income stated asset loans uses the DTI ratio to qualify my borrowers!! (You can apply for purchase and refi at the website below.) 

There is also a term called Debt Service Ratio. A serious old school commercial lender will use the following formula to calculate debt service ratio:

First calculate  Gross Annual Income less 5% Vacancy=Stabilized Annual Income.

Second, Calculate Total Operating Expenses by adding up all of your Operating Expenses (Real Estate taxes+Water and Sewer+Liability Insurances+Heat/Gas+Electricity+Maintenance and Reserves(5%)+Management)..

Third, Stabilized Annual Income minus Total Operating Expenses = Net Annual Income.

Fourth, calculate Annual Debt Service by taking your Principal and Interest(no taxes an insurance!!!) X 12.

Fifth, Net Annual Income /Annual Debt Service=DSR "aka" Debt Service Ratio!!!!!!!!

Now don't get all excited and get some bumper sticker saying "I Calculate My DSR Every Month" or "I survived DSR School!"  Just use this blog to understand that these are the types of things we will need you to know or have ready to make your commercial loan process move ahead!!

Note:the purpose of this blog is for our customers, and C.P.A.s and those preparing to buy a property.  This blog does not imply any promise to lend and no detrimental reliance should occur on the part of anybody reading this blog.  By reading this blog you will become a tad bit smarter but the likelihood of using debt servicing ratios as cocktail conversation may prove quite boring to some and cost you some friends.  Apply for your commercial loan at our website http://www.mybuildingfunds.com

Remember Multifamily, and Mixed Use Refinances or Purchases are still available up to 60 to 65% LTV if your credit score is less than 599 and even below 500!  subject to final quick undewriting by bank! Hurry the world is changing and so can these programs!

Comments (4)

Heather the Realtor Orlando, Lake Mary
LemonTree Realty - Orlando, FL
First Time Home Buyers, Bank Owned Homes
Charles nothing like a great tag line and leave your readers hanging so we are forced to come back in a few hours to find out what this secretive DSC?
Mar 26, 2008 05:58 AM
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Charles,

It's midnight on Active Rain, and I still don't have a clue what DSC is.  You're sound asleep, no doubt.  I'll be back tomorrow!  LOL

Mar 26, 2008 05:01 PM
Charles G. Hennebeul
AMERICAN CASH SOLUTIONS INC - Melville, NY
not only was I sleeping Mike but I was counting sheep!
Mar 27, 2008 01:33 AM
Christine Thierry
Sterling Home Mortgages - Narberth, PA
CRMS

5 stars!  You made the Mortgage Pro Week in Review!

Mar 31, 2008 05:03 AM