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What Is The Debt Service Coverage Ratio (DSCR)?

DSCR (Debt Service Coverage Ratio) Loans offer investor access to long or short-term financing for individual rental properties. It enables real estate investors to qualify based on rental income rather than personal income. DSCR loans are a great financing option for self-employed investors and investors looking to grow their portfolios rapidly. Either Purchase or refinance

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What is the Debt Coverage Ratio for a Mortgage?

DSCR stand for debt-service coverage ratio. Debt-Service Coverage Ratio mortgage loans is a very popular mortgage program for real estate investors of income producing investment properties. The qualified income is derived from the subject property and not the borrower.

Who Qualifies For DSCR Mortgage Loans?

DSCR mortgage loans are non-QM loans originated by individual non-QM mortgage lenders. DSCR mortgage loans are portfolio loans. What this means is there is no unform mortgage agency like Fannie Mae and/or Freddie Mac to set guidelines. Debt-service coverage ratio mortgages are portfolio mortgages with lending requirements based on each individual lender’s standards.

How Do DSCR Mortgage Loans Work?

DSCR mortgages loans are underwritten and approved on the basis of each individual property’s ability to repay. The rents need to cover the principal, interest, taxes, and insurance. The borrower’s income does not need to be verified. Minimum mid-FICO 620

The Asset Depletion Portfolio Loan Programs And How It Works

Asset depletion portfolio loan programs use the borrower’s assets as collateral versus the borrower’s income. Asset-based lending allows the lender to deplete the borrower’s assets and count those funds in lieu of traditional income for the term of the loan.

In general, the following terms below are used in qualifying borrowers of asset-based lending:

  • In general, most asset-based lenders will take 70% of the total aggregate assets of the borrower70 percent

  • Some investors will go up as high as 90%

  • The borrower’s closing costs and other fees will be subtracted from the top

  • The balance is then divided by 360 which will be split into monthly installments

  • This figure will be added on top of the borrower’s monthly income

  • The total figure will be used as the monthly income of the borrower to determine eligibility

  • The down payment requirement on asset depletion loan programs depends on a case by case scenario

  • 10% to 30% down payment is required on asset depletion loan programs

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