DSCR
A DSCR (Debt Service Coverage Ratio) loan is a financing option tailored for real estate investors who want to qualify based on a property’s cash flow rather than personal income. This makes it an excellent choice for those with multiple rental properties or those who may not have traditional income documentation, like self-employed investors.
The key metric for these loans is the Debt Service Coverage Ratio, which measures a property's ability to cover its debt obligations. It is calculated by dividing the monthly rental income by the total monthly debt payments, including principal, interest, taxes, insurance, and association dues (PITIA). For example:
- DSCR > 1%: Indicates positive cash flow, meaning the property generates more income than its debt obligations.
- DSCR < 1%: Indicates negative cash flow, where the property does not produce enough income to cover debt expenses.
Most lenders, including us at Win Win Financial, typically require a minimum DSCR of 1.0, signifying a stable cash flow cushion.
- No Personal Income Verification: The focus is on the rental income of the property, making it ideal for investors with complex income structures.
- Streamlined Qualification: Without the need for traditional income documentation, the application process is quicker and more efficient.
- Flexible Use: DSCR loans can be used for purchasing new rental properties, refinancing existing ones, or even cash-out refinances for property upgrades or additional investments.
For more details or to see if a DSCR loan is right for your next investment, contact us today!