Long & Short Term Rentals
Low & No Ratio
Commercial to 10 Units
- To 80% LTV
- FICO – 640
- Cash-Out Refis
- Amounts to $3 MM
- ITIN
- Foreign Nationals
- New Investors
- 100% Gift Funds
- RA Zoning
DSCR is an acronym for Debt-Service-Coverage-Ratio. DSCR Investor Loans are a financing product that has been lifted from the commercial loan playbook and become very popular among RE-Investors. The loan’s income qualification is based principally on the value of the asset, and not the borrower. Simply put, if the rents cover the costs (PITIA), then the DSCR => 1.0. (positive cash flow)
(Gross operating income) divided by (Principal + Interest + Taxes + Insurance + Association (HOA dues, if applicable)=> 1.0
A good FICO credit score is required (minimum 640).
Ownership of a principal residence is usually required.
4-8 months of reserves to cover the cost of the initial loan payments are usually required.
Most Lenders will charge an Underwriting Fee (typically $995-$1495), and a 1-2 point premium for this type of loan.
Here are the Pros and Cons of using DSCR Investor Loans:
PROs:
There is no requirement for W2’s, 1040 taxes, Pay stubs, 1099’s or bank statements.
As long as there is positive cashflow, the Lender does not place many LLA (line level adjustments) on the loan. A minimum FICO score and sufficient reserves to cover 6-9 months of payments are all that is usually required.
Since there is no waiting for tax transcripts or other income verification, the only wait time may be for an Appraisal.
Most RE-Investors know the benefits of using an LLC for vesting, and DSCR-Investor-Loans typically allow this structure.
Conventional loans allow only 10 non-owner occupied properties. You may have an unlimited number of DSCR-Investor-Loans.
CONS:
There is usually a 1-1.5% higher interest rate for DSCR loans compared to conventional loans.
The Lender will typically require that you keep the loan for 3-5 years. If you choose to exit earlier, there will be a 3-5% penalty on the loan balance.
Vashon Mortgage – NMLS #2431410 & Collen & Associates CA DRE #01452367
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Randal Collen MLO #2386273 & DRE #01452367
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