​DSCR Loans – The Investor Cash Flow Loan

​Attention real estate investors! Are you tired of the hassle and piles of paperwork associated with traditional bank loans or the high-interest rates of hard money loans? Look no further than our DSCR - Investor Cash Flow Mortgage Program! Unlike traditional loans, no tax returns or personal income are required, and there are no complex interpretations of your other investment properties are required.

Who is the ideal candidate for this program?

The ideal candidate for a DSCR loan is a residential property investor who are looking for a simpler way to purchase their next rental property, without the headaches of a traditional investor loan, while avoiding the "hard money" interest rates and terms.

How does a DSCR Loan Work?

Instead of income verification, we use the monthly rental income potential of the investment property you are financing as the "income" for the new loan, and then we compare this number with the home's expenses, such as property taxes, insurance, and association fees.

THE DSCR FORMULA

First, your lender orders a ​standard appraisal of the home by a licensed real estate appraiser to determine the market value of the home. What sets this program apart is that we also order an additional report, called a Market Rent Analysis, which provides information about the average market rents of similar homes in the same marketplace. 

This rental figure then becomes the INCOME for the loan.  Next, we’ll calculate the standard EXPENSES for the home, including property taxes, property insurance, along with any required association dues.

And finally, we calculate the debt service coverage ratio as follows:

Monthly RENTAL INCOME divided by Monthly EXPENSES.

The annual net figure of DSCR can also be calculated using annual figures as well as monthly figures. For instance, annual gross operating income / rental income divided by annual debt/ total debt. The ratio itself is the same, whether you calculate it monthly or annually.

THIS  NUMBER IS KNOWN AS THE DEBT SERVICE COVERAGE RATIO, or DSCR RATIO FOR SHORT.

• IF THE RATIO IS 1.00, it means that the property breaks even each month. (aka - NEUTRAL cash flow) It neither makes money, nor loses money, each month.
• IF THE RATIO IS HIGHER THAN 1.00, then it’s making money each month (aka - POSITIVE cash flow) It means that this property is making a profit each month.
• IF THE RATIO IS BELOW 1.00, then the property is losing money each month. (aka - NEGATIVE cash flow) It means that this property is losing profit each month. 

​For most investment property loans like this one, the ideal ratio should be 1.00 or higher. The higher the number, the more the property cash flows and the more profitable it is from an investment standpoint. 

There are times when a negative debt coverage ratio can make for a profitable venture in the long run, especially when an existing home has been mismanaged and/or needs improvements. In this type of scenario, a DSCR loan allows the investor ample time to improve the property and/or adjust the rents to reflect the current market rates. This is why we allow a negative DSCR ratio down to 0.75 for seasoned investors on a case by case basis.

FEATURES AND BENEFITS:

• 30 Year Fixed Rate Terms
• No PMI– Regardless of the size of your down payment
• Occupancy – Investment Homes Only. The borrower may not occupy the property
• You can use this program to finance the following property types:           

          » Single Family Homes
          » Townhomes/Villas
          » 2-4 Unit Multi-Family Homes
          » 5-8 Unit Residential Properties 
          » Condominiums
          » Non-warrantable Condos
          » Condotels

• Pre-Payment Penalties - Prepayment penalties are standard for this loan program, and range from 1-5 years depending on several factors. Longer prepayment penalties can improve the overall terms of the loan, and if desired, the penalty can be removed or reduced with a one-time upfront fee at closing. Your loan originator can help you determine the best structure for your goals.
• Short term rental income - our DSC ratio loan program allows short term rental income on a case-by-case basis for properties that are better suited to short term income potential.
• Close in the name of your LLC or other entity (a one-time fee may apply)Loan Sizes - $100K - $3.5MM

How do I qualify for a DSCR loan?

• Qualified borrowers must already own their own primary residence. If you are renting, this may be considered on a case-by-case basis; however you must show a 12-month timely payment history of renting your place. (Note: "living rent-free" is not acceptable)
• Down Payment - For experienced landlords, you’ll need a down payment of at least 15% of the purchase price. First time landlords will need a down payment of at least 20%.You’ll need to provide the most recent 
• 2 months of your bank statements showing that you have sufficient funds for the down payment and settlement charges.  Additional funds for reserves may be required for scenarios involving DSCR ratio is below 1.00, as well as applicants with lower credit scores and first-time investors.
• Minimum Credit Scores: we accept scores as low as 575 (down payment may be affected by score)
• Loan Application – apply with us online HERE »

How do I calculate the Debt Service Coverage Ratio (DSCR)?

Our free DSCR calculator allows you to quickly run your own DSCR scenarios to determine the cashflow potential of any home. Unlike other DSCR calculators on the web that are geared for commercial investment loans, ours is much easier to use, and is specifically designed for use with our DSCR Investor Cash Flow Program.  You'll want to add this one to your favorites!
Try it out today » 

​So if you’re ready for an easier way to finance your next investment opportunity without the headaches of traditional financing and inexperienced lenders, check out our DSCR Investor Cash Flow Program.  »  

Give us a call or click today.  If you have a question, drop us a line and we'll get back to you straight away!

Yours in successful homeownership,

Derek Bissen
Loan Originator
NMLS#365627
Unconventional Lending Program Director

WATCH A VIDEO ABOUT THIS PROGRAM: