Qualify for a home loan without using your tax returns. A debt service coverage ratio loan is a type of non-QM loan for real estate investors. Lenders use a DSCR to help qualify real estate investors for a loan because it can easily determine the borrower’s ability to repay without verifying income
How Does a DSCR Loan Work?
Some individuals may not qualify for a conventional loan. The debt service coverage ratio loan allows these individuals to qualify more easily because they don’t require proof of income via tax returns or pay stubs that investors either don’t have or that don’t represent their true income due to write-offs and business deductions.
The Debt Service Coverage Ratio is a ratio of a property’s annual gross rental income and its annual mortgage debt, including principal, interest, taxes, insurance, and HOA (if applicable). Lenders use this to analyze how much of a loan can be supported by the income coming from the property as well as to determine how much income coverage there will be at a specific loan amount.
Benefits of DSCR Loans for real estate investors include:
- No Income or job history verification
- As little as 20% on down payments
- Debt Service Coverage Ratios as low as .75%
- Interest-only loan option available
- Suited for new and seasoned real estate investors
- Both long-term and short-term rentals are eligible
- DSCR LLC loans: Close in the name of your LLC