How does a DSCR Loan work?
A DSCR (Debt Service Coverage Ratio) loan is a measure of the cash flow a borrower has to pay against current debt obligations for an investment property. A DSCR loan is a type of non-QM loan used by real estate investors to help them qualify for a loan based on their property's cash flow, without having to verify personal income.
Who is eligible for a DSCR Loan?
Eligibility criteria for DSCR loans may vary depending on the lender, but generally, applicants must demonstrate sufficient rental income or cash flow from the property to cover the loan payments, along with meeting other financial requirements such as credit score, down payment, and financial reserves. Additionally, lenders may consider factors such as the property's location, condition, and potential for generating rental income. It's advisable to consult with lenders directly to understand their specific eligibility requirements for DSCR loans.
What are the benefits of a DSCR Loan?
DSCR (Debt Service Coverage Ratio) loans offer several benefits, including competitive interest rates, favorable terms, and higher loan amounts compared to traditional residential mortgages. They assess the income potential of the property or business instead of the borrower's personal finances, making it easier for investors and business owners to qualify for financing. Moreover, DSCR loans offer flexible repayment plans aligned with the property or business's income stream, along with potential tax benefits, making them appealing for those financing commercial real estate or income-generating businesses.
What are the requirements for obtaining a DSCR Loan?
To get a DSCR loan, borrowers typically need to meet specific requirements. This may involve providing documentation related to the income potential of the property or business, such as rent rolls, profit and loss statements, and lease agreements. Lenders also assess the property's or business's Debt Service Coverage Ratio, along with the borrower's credit history, financial profile, and sometimes a down payment. Meeting these requirements shows the property or business's ability to generate enough income to cover the loan payments, making it an attractive investment for lenders.
Contact Canyon Mortgage Corp. today to learn if a DSCR Loan is right for you!
