DSCR Loans for Rental Property Investors
Designed specifically for rental property investors, DSCR (Debt Service Coverage Ratio) loans provide a streamlined and flexible financing solution for acquiring, refinancing, or cashing out on investment properties.
DSCR Loan Program
Key Features:
- Loan Amounts: Up to $3 million, with a minimum loan size of $100,000.
- Loan Purpose: Available for purchases, cash-out refinances, and rate-term refinances.
- Short-Term Rentals: Eligible for both long-term and short-term rental properties; AirDNA reports are accepted.
- DSCR Flexibility: Options available for DSCR ratios below 1.0, with additional no-DSCR options for certain scenarios.
- Income Requirements: No personal income or employment verification required; qualification is solely based on the property’s cash flow analysis.
- Financing Limits: Borrowers can finance up to five loans with AOMS, with exceptions considered for portfolios exceeding five loans.
- Property Ownership: No limit on the total number of financed properties a borrower can own.
- Restrictions: First-time homebuyers (FTHB) are not eligible.
- Title Vesting: Properties can be vested in LLCs, S-Corps, C-Corps, or revocable trusts.
- Residency Requirements: Both permanent and non-permanent residents are eligible.
- Additional Benefits: Interest-only options, acceptance of gift funds, and up to 6% seller concessions available.
- Property Types: Financing available for warrantable and non-warrantable condos, as well as condo hotels.
Min Fico
680
(Up to 75% LTV)
Max LTV
85%
(Minimum 720 FICO)
Understanding DSCR Loans
A DSCR loan (Debt Service Coverage Ratio loan) is tailored for both short-term and long-term rental property investments. This type of financing allows borrowers to qualify based solely on the property’s income potential, eliminating the need for personal income or employment documentation. DSCR measures a property’s ability to generate sufficient cash flow to cover mortgage payments. It is calculated by dividing the net operating income by the total debt obligations, including mortgage payments.
DSCR Loan Program FAQ's
How is the Debt Service Coverage Ratio (DSCR) Calculated?
The DSCR is a critical metric in determining a property’s financial health. The ratio compares the property’s gross rental income to its annual mortgage-related expenses, which typically include principal, interest, taxes, insurance, and HOA fees (PITIA). The formula is as follows:
DSCR = Gross Rental Income ÷ Annual PITIA
Examples:
- Positive Cash Flow (1.10 DSCR): $1,100 Rent / $1,000 PITIA = 1.10 DSCR
- Break-Even (1.00 DSCR): $1,000 Rent / $1,000 PITIA = 1.00 DSCR
- Negative Cash Flow (0.90 DSCR): $900 Rent / $1,000 PITIA = 0.90 DSCR
Can I Get a Mortgage for an Investment Property?
Yes, through our Investor Cash Flow product, you can qualify for a mortgage based solely on the property’s rental income. No tax returns or employment information are required.
Is Personal Income Required to Qualify for an Investor Cash Flow Loan?
No, personal income is not a factor in qualifying. This streamlined approach saves you from the hassle of submitting income statements and tax returns.
Do Real Estate Investment Loans Close Faster Than Other Mortgage Loans?
Typically, DSCR loans close faster due to the simplified qualification process. However, timelines can vary depending on the specific loan scenario. Contact a Florida Dream Home Loan Officer to discuss your unique situation.
A DSCR No Ratio Loan is a specialized financing product designed for real estate investors who own or plan to acquire rental properties but may not meet the typical cash flow requirements under a traditional DSCR loan. Unlike standard DSCR loans that require a specific ratio (usually above 1.0) between the property’s rental income and its debt obligations, a DSCR No Ratio loan does not require a minimum ratio. This makes it ideal for properties with lower or inconsistent cash flows or investors using a strategy focused on long-term appreciation rather than immediate income.
Key Features of DSCR No Ratio Loans:
- No Minimum DSCR Requirement: The property’s income is not a determining factor for eligibility, allowing more flexibility in financing properties with lower cash flows.
- No Income or Employment Verification: Like standard DSCR loans, No Ratio loans rely on the property’s potential income and do not require personal income or employment documentation.
- Wide Property Eligibility: These loans can be used for a variety of property types, including single-family homes, condos, and multi-unit buildings.
- Non-Owner Occupied Properties: These loans are intended for investment properties only, not for primary residences.
- Flexible Loan Structure: Investors can benefit from interest-only payment options, as well as the ability to close the loan under an LLC or trust, providing both operational and tax benefits.
- Ideal for Unique Investment Strategies: This loan option is particularly beneficial for investors who prioritize property appreciation or have other income sources to cover debt payments.
Benefits:
- Increased Flexibility: Perfect for seasoned investors managing diverse portfolios, as it allows more room for strategic purchases, even if cash flow is currently low.
- Easier Qualification: Without the need to meet a specific DSCR, more properties qualify, making it easier to expand your investment portfolio.
- Streamlined Process: Investors can close deals faster without the need to analyze detailed cash flow metrics.
DSCR No Ratio loans are designed for investors looking to take advantage of property opportunities where traditional metrics might be a limitation. With this loan, you have the freedom to focus on your broader investment strategy while securing the financing you need.
DSCR loans offer rental property investors a streamlined path to financing by focusing on a property’s income potential rather than traditional income or employment verification. With flexible loan options, including the ability to finance short-term rentals and properties under various ownership structures, these loans cater specifically to the unique needs of real estate investors. For those seeking even more flexibility, DSCR No Ratio loans are available, allowing qualification without a defined DSCR, which is particularly useful for properties with lower cash flow or unique investment strategies. Whether you’re expanding your rental portfolio or optimizing your existing assets, DSCR and DSCR No Ratio loans provide powerful solutions tailored to maximize your investment opportunities.
