Real estate investing is, for many, the gateway to financial freedom, but prohibitive eligibility requirements can make it feel like that gateway has slammed shut for those with unconventional sources of income. Fortunately, a DSCR (Debt Service Coverage Ratio) mortgage is a key that can unlock that door and make the American Dream more attainable than ever before for self-made people like you. Buying an investment property using a DSCR loan is an excellent way to achieve true financial freedom.
At Mbanc, we have been helping self-made people like you finance their real estate investing journey with confidence and achieve true financial freedom for years.
What is a DSCR Loan?
A DSCR mortgage is a unique type of loan that caters to self-employed borrowers who want to purchase an investment property.
This loan remediates the common issue of having to deal with complex tax returns and income statements for self-employed investors. Borrowers can qualify to either purchase or refinance an investment property using rental income derived from the income property.
This loan is a measure of the cash flow the borrower has to pay against current debt obligations for an investment property. You can qualify for this loan by proving the monthly income from a prospective property will cover the monthly mortgage payment.
To calculate DSCR, divide rental income by debts and expenses incurred, including the principal and interest payments for the mortgage. For example, imagine the net operating income from a property is $30,000 and the mortgage payment is $15,000.
$30,000 / $15,000 = 2
The DSCR in this situation is 2. The larger the DSCR, the better for the borrower. Most lenders require a DSCR of 1.25 at minimum. With the right DSCR and credit score, your down payment can even be as low as 20%.
DSCR loans are also great for those with multiple investment properties who have reached their traditional credit limit. Crucial features of purchasing an investment property using a DSCR loan from mbanc include:
- Loan amounts up to $3,500,000
- No W2, tax returns, or pay stubs required
- Unlimited cash-out refinance options
- 10 year Interest Only Orograms on 40 and 30 year terms
- The ability to commit to many properties at the same time
- Lower interest rates than other types of loans because they are less risky
- Quicker closing times
“Ask any expert, and they’ll agree–home values and rents will only increase in the coming years. DSCR investor loans are an excellent way to start building long-term portfolios and accumulating generational wealth. Non-qm DSCR loans are designed specifically for real estate investors. And the fast, easy approval process and low-interest rates are just the beginning of the benefits. These programs often come with flexible repayment schedules tailored to your schedule.” – Desh Weragoda, mbanc CTO
How Can You Qualify to Purchase an Investment Property Using a DSCR Loan?
Qualifying to purchase an investment property using a DSCR loan is often a faster and easier process than conventional financing. Still, after submitting your application for this financing, you must satisfy the criteria.
One significant benefit of purchasing an investment property with a DSCR loan is that you do not have to provide proof of personal income, making it far easier and faster to obtain financing. To qualify for this mortgage program, you must:
- Have a minimum credit score of 660.
- Provide an appraisal and rent schedule.
- Prove that the occupancy rate for the property will be at least 65%.
- Provide 6 comparison properties for reference within two miles of the subject property that are similar in size, room count, amenities, availability, and occupancy.
- Provide an overview report.
- Prove that the market grade by zip code has a “B” grade or better.
Still, calculating and compiling these projections is difficult without extensive expertise.
Fortunately, using the cutting-edge short-term rental intelligence powered by STR Verifi, a rental calculator that empowers you to access key metrics about any property or market instantly, qualifying for financing has never been easier, putting any market at your mercy.
What Kind of Properties Can You Purchase with a DSCR Loan?
You can only purchase an investment property using a DSCR loan. You cannot use this mortgage program to purchase your primary residence. This type of loan can be used for long-term and short-term single and multi-family rental investment properties.
Apply For The Best DSCR Loans Today
Investing in real estate is investing in financial security for yourself today, decades down the line, and for future generations. But conventional loans can have prohibitive eligibility requirements for self-made people with an unconventional income. Purchasing an investment property using a DSCR loan is an excellent option for self-employed investors who want to continue to succeed on their terms.
To learn more about how we can finance the start of your short-term rental investing journey with a fast and easy approval process, visit our Non-QM DSCR Loans and Mortgages page and apply for financing today.