Understanding DSCR Loans and What Qualifies a Property as a Good Rental

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How to Get a DSCR Loan

Understanding the Debt Service Coverage Ratio (DSCR):
The DSCR is calculated as:

• A DSCR of 1.0 means the property breaks even (income covers debt).
• Most lenders require a DSCR of 1.2 or higher, meaning the property's rental income is at least 1.2 times the mortgage payment.

Meet the Loan Requirements:

• Credit Score: Typically 620+ (some lenders prefer 680+ for better terms).
• Down Payment: Usually 20-25% of the property value.
• Property Cash Flow: The rental income should sufficiently cover loan payments.
• Reserves: Lenders may require 3-6 months of reserves to cover expenses.

Find a DSCR Lender:

• Work with lenders specializing in DSCR loans, such as mortgage brokers, private lenders, or alternative lending institutions.

Submit Documentation:

• Property's rental analysis (lease agreements or appraised market rent).
• Credit report and personal financial background.
• Property details (appraisal, condition, and rental history if applicable).