The Debt Service Coverage Ratio is a ratio of a property’s annual net operating income and its annual mortgage debt, including principal and interest. Lenders use DSCR 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.
What Are the Requirements?
What is the appeal of a DSCR loan?
One of the big benefits of a DSCR loan is that a personal income Is not required. We are interested in the cash flow the subject property is calculated to generate.
Fidelity Home Group DSCR features:
Borrower must own a primary residence
No leases are required to be listed
No lease required if not rented
A DSCR 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.
Because real estate investors write off expenses on their properties, some 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.