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Investor Loans

A Debt Service Coverage Ratio (DSCR) loan is a type of mortgage that is primarily evaluated based on the income generated by the property rather than the creditworthiness of the borrower. The DSCR measures the property's ability to generate enough income to cover its debt obligations, including the mortgage payment.

The DSCR is calculated by dividing the property's net operating income (NOI) by its total debt service. The NOI is the income generated by the property after operating expenses such as maintenance, taxes, and insurance are deducted. Total debt service includes the principal and interest payments on the mortgage loan.

DSCR = Net Operating Income / Total Debt Service

The acceptable DSCR can vary depending on the lender and the type of property. Generally, lenders prefer to see a DSCR of at least 1.00, meaning the property's income is equal to its debt obligations. However, certain lenders may have stricter requirements.

A DSCR loan must be used to finance an investment property within the United States. You have choices for the type of home you purchase:

  • Existing Single-Family Home
  • Townhouse or Condominium in a VA-Approved Project
  • New Construction Residence
  • 1-8 Unit properties

  • No personal income used for qualifying
  • No debt-to-income ratios used 
  • Qualified based upon the cash flow of the subject property
  • May own an unlimited number of financed properties

As with any loan there are some drawbacks.

  • Higher interest rates
  • Some loan options have a prepayment penalty
  • Higher loan costs

Depending on the lender these requirements may vary.

  • 660 minimum credit score
  • 20% down payment
  • Property not to exceed 8 units
  • Debt coverage ratio to be at or above 1.00
  • Loan amounts not to exceed $2 Million
  • At least 6 months of reserves

  • 30 year fixed rate
  • 30 yr and 40yr interest only options
  • 5/6, 7/6, 10/6 adjustable rate mortgage
  • Prepayment penalty period: none, 1yr, 2yr, and 3yr