A DSCR loan, or debt service coverage ratio loan, is a type of mortgage used for purchasing short-term or long-term rental investment properties. With a DSCR loan, borrowers can qualify for a mortgage based on a property’s rental analysis. No personal income or employment information is required to qualify. Debt service coverage ratio or DSCR is a measurement of a property’s expected cash flow to determine ability to repay a mortgage loan. It is calculated by dividing the borrower’s net operating income by their debt obligations, including the debt payment.
- Loans up to $3 million with a minimum of $100,000
- Purchase and cash-out or rate-term refinance
- Short-term rentals allowed (AirDNA reports accepted)
- DSCR < 1.0 and No DSCR options available
- No income or employment required; qualifications based on property cash flow
- Max of five loans with AOMS; exceptions considered when there are more than five loans
- No limit on total number of financed properties a borrower can own
- First time home buyer (FTHB) not allowed
- Properties can vest title in LLC, S corp, C corp, or revocable trusts
- Permanent and non-permanent residents allowed
- Interest-only available; gift funds okay
- Up to 6% seller concessions
- Warrantable, non-warrantable, and condo hotels allowed
How debt service coverage ratio (DSCR) is calculated?
The debt service coverage ratio (DSCR) is a ratio of a property’s cash flow to its annual mortgage debt. Clear Mortgage includes principal, interest, taxes, insurance and HOA fees in the mortgage debt. The ratio is calculated by taking the expected rental payment and dividing it by the annual mortgage debt RDP (Rent Divided PITIA= DSCR).
Example Rent Divided PITIA (RDP)
$1100 Rent / $1000 PITIA = 1.10% DSCR Positive Cash Flow
$1000 Rent / $1000 PITIA = 1.00% DSCR 1 to 1 Break Even
$900 Rent / $1000 PITIA = .90% DSCR Negative Cash Flow
Can I get a mortgage for an investment property?
Yes, utilizing our Investor Cash Flow product allows for cash flow on the property to be used to qualify for the loan. No tax returns or employment information required.
Is personal income required to qualify for an Investor Cash Flow loan?
No personal income is required to qualify. This saves you from submitting complicated income statements and tax returns.
Do real estate investment loans close faster than other mortgage loans?
Typically these loans do close quicker than others but this can vary.
