This is a called a DSCR (Debt Service Coverage Ratio) Program.  Unlike other loan programs that use tax returns and require a mountain of paperwork, this program uses the cash-flow potential of the home as the "income" for the home and compares it to the expenses.

When the appraisal is ordered, a licensed appraiser performs a standard residential appraisal report, along with a supplemental report called a Market Rental Analysis which provides the average market rent for similar homes in the surrounding area.

This number is then compared to the full monthly payment on the new loan. (example: A ratio of 1.0 means that the rent supports 100% of the new payment)  

This program is similar to a commercial loan program that uses debt-service to qualify; however the approach for our residential DSCR program is much simpler, and the scope due diligence and documentation is significantly easier.

The loan terms for a DSCR Loan are determined by the following criteria:

• DSCR Ratio - (how well the property cash-flows) - We will finance properties with a ratio of 0.75 and higher.

• The applicant's middle FICO score

• Size of the down payment.  

• Prepayment Penalty (optional) - Options include: no prepayment penalty, 1 year, 2 year, or 3 year (ask your Loan Originator for details)

 The minimum down payment for seasoned investors is 15%. For first-time investors, the minimum down payment is 30%. (a seasoned investor is defined as an applicant with 12 months of landlord experienced in the past 12 months)

Applicants must have 3 active credit tradelines appearing on credit history for the most recent 12 months, *OR* 2 active tradelines for the most recent 24 months. Applicants must have prior homeownership experience in the most recent 3 years, and have a clean, verifiable residency payment history in the most recent 12 months.

If the DSCR Ratio is ≥ 1.00...

• The maximum LTV is 80% for applicants with a middle FICO of 700 or higher for purchase and rate & term refinance transactions.  (max LTV of 75% for cash-out transactions)

• The maximum LTV is 80% for purchase for applicants with a middle FICO of 660 or higher for purchase and rate & term refinance transactions. (max LTV of 70% for cash-out transactions)

• The maximum LTV is 80% for purchase for applicants with a middle FICO of 660 or higher for purchase and rate & term refinance transactions. (max LTV of 75% for cash-out transactions)

If the DSCR Ratio is < 1.00...

*NOTE: The minimum acceptable DSCR ratio is 0.75 *

• The maximum LTV is 75% for purchase for applicants with a middle FICO of 660 or higher for purchase and rate & term refinance transactions. (max LTV of 70% for cash-out transactions)

• The maximum LTV is 75% for purchase for applicants with a middle FICO of 660 or higher for purchase and rate & term refinance transactions. (max LTV of 65% for cash-out transactions)

• The maximum LTV is 80% for purchase for applicants with a middle FICO of 620 or higher for purchase and rate & term refinance transactions. (max LTV of 60% for cash-out transactions)

If you have questions about this program, please call us today or message us today!