Debt Service Coverage Ratio
DSCR
The DSCR loan program is an incredibly powerful financing tool tailored explicitly for real estate investors. More than many traditional mortgage loans that tend to require extensive documentation of personal income, the DSCR loan is based on the income produced by the investment property itself. That makes DSCR an ideal alternative for experienced and aspiring investors looking at building or increasing their real estate portfolio.
What is DSCR?
DSCR stands for Debt Service Coverage Ratio and is used in calculating the cash flow of a property towards its debt obligations. The ratio is calculated by dividing the net operating income (NOI) against the total debt payments. So, if, for example, a property generates $2,000 in monthly gross rental income and the loan on that property requires payments of $1,500 every month, then the DSCR is 1.33. A DSCR greater than 1 means the property income exceeds the debt obligations, so it's cash-flow positive.
Key Benefits of DSCR Loans
Who Can Benefit from a DSCR Loan?
This program is perfect for real estate investors, both new and seasoned, who:
How to Qualify for a DSCR Loan
Qualifying for a DSCR loan depends on a few key factors: