Our Debt Service Coverage Ratio (DSCR) mortgages have become a popular choice for non QM loans, largely due to how easy they are to qualify for. Unlike most mortgages offered under conventional underwriting standards, the DSCR program doesn’t require the borrower to provide or verify their own personal income or employment history. Rather, the program is designed to factor the rent vs. the Principal, Interest, Taxes and Insurance (PITI) of the mortgage payment to determine if there is sufficient cash flow to qualify for this portfolio loan.
Appraising the Home and Doing a Market Analysis
When purchasing a home that currently is not being rented, the portfolio lender will require that the appraiser demonstrate the market value of the home being financed and do a market analysis of what the long-term rental tenant could expect to pay per month to rent the home.
If the home is expected to generate a higher amount of rent than the PITI of the new mortgage, lenders for this program will often only require 15%-20% down. When the PITI exceeds the expected monthly rental payments, most lenders will require the borrower to put an additional 5%-10% down.
A Popular Choice for Non QM Loans
Not only are DSCR loan types a popular non QM loan to use for purchasing an investment property, but they have also been extremely popular for investors that already own property. Investors will use this type of loan to refinance and get cash out of their investment. Then, they will use the cash for home renovations and to buy additional investment properties.
Portfolio Lenders Consider Credit Score
Portfolio lenders for DSCR loans will take into account the borrower’s credit score as another factor to account for the maximum Loan To Value and interest rate offerings for that borrower. It’s very typical for borrowers with lower credit scores to be more limited on the maximum loans they can acquire and be offered a higher interest rate.
DSCR Program Highlights
- Up to 85% Purchase Financing
- Maximum 75% LTV Cash Out
- Minimum FICO 575
- No Employment or Income Verifications
- Foreign Nationals and Non-Permanent Residents OK
- Condotels allowed
- Gift Funds OK
- Title in LLC acceptable
- 30yr and 40yr Fixed, Interest Only and 7/6 ARM terms offered
- Up to 34 Unit properties
Is a DSCR Mortgage Right for Your Portfolio?
Under the right circumstances, a Debt Service Coverage Ratio mortgage may be the perfect non QM loan to help you reach your goals. To understand if this is the best type of mortgage for you, schedule a consultation with one of our mortgage lenders today.