Do you have investors who can't qualify for a "full doc" loan? I may have the answer for them and you. A Debt Service Coverage Ratio (DSCR) loan!
What is a DSCR?
A DSCR measure a borrower's cash flow against current debt obligations for an investment property. It is a type of mortgage that a real estate investor might qualify for to purchase property without showing proof of income.
Here is a simple calculation: gross rent/PITIA (divide the gross rent over the total payment). If the answer is positive, there is enough cash flow to cover the debt service. If negative, there isn't enough to cover the debt service.
Example: Rent= $3600. Total payment, including taxes, insurance, and HOA= $3500. $3600/$3500= 1.0286. We have a loan,, and you have a sale!
Quick Hit Parameters
- 80% LTV
- We can do 5-8 units at 70% LTV
- Loan amount up to $1.5M
- Interest-only or amortizing payments are available!
- The customer gives us no income information, tax returns, or P&Ls—just asset information.
What about rates?
Rates will be higher than total document rates. Expect anywhere from 8.25% to 9.25%. By the way, total doc investment property rates are 7.875%! But, with no documentation—not too shabby! Thanks for stopping by to read. Feel free to comment if this is helpful, or drop us your burning questions.
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