DSCR Mortgage Loan

DSCR Mortgage Loans (Debt Service Coverage Ratio Loans) are a specialized type of lending product designed with real estate investors in mind. By focusing on the income generated by a property rather than the personal income of the borrower, DSCR mortgage loans provide a flexible financing option that can unlock new investment opportunities.

What is a DSCR Mortgage Loan?

DSCR, or Debt Service Coverage Ratio, is a calculation used by lenders to assess a borrower’s ability to cover their debt obligations.

With a DSCR mortgage loan, the primary focus is not on your personal income but rather the income generated by the property being financed. This unique approach makes DSCR loans an attractive option for real estate investors​.

The DSCR ratio for residential loans is calculated by dividing the gross rental income by the total housing/property payment (principal, interest, property taxes, insurance, and HOA dues, if any). It is that simple – rent/total payment. Residential DSCR loan calculations should not be confused with commercial DSCR calculations, which are much more complex.

Residential DSCR loans are broken into different classes based on the actual ratios. If the ratio is “1.0,” meaning that the monthly rent exceeds the monthly payment, the loan associated with the property will have better terms. The next class of DSCR loans have ratios in the 0.75 to 1.0 range. Even though the properties do not have enough rent to cover the payment, they are still eligible for financing. They will, however, be subject to larger down payment requirements as well as higher rates and fees. The final class of DSCR loans are those with ratios below 0.75. There is often financing for these properties as well, but the down payment, interest rate and fee requirements are even higher than those associated with the 0.75 to 1.0 range.

For gross rental income, we use either actual rents from leases or market rents, as estimated by an appraiser, for vacant units.

Core Benefits of a DSCR Loan

• Property-based loans: The loan is mainly based on the income generated by the property, not your personal income, making it much easier for many investors to qualify for mortgage financing.
• Attractive to investors: Since these loans focus on property income, they are particularly suitable for rental properties that generate income.
• Better terms: DSCR loans offer better terms than alternative financing such as hard money or private money mortgages.

Eligibility Requirements for a DSCR Loan

To qualify for a DSCR loan, there are several key requirements you need to meet​:

• Income-Generating Property: The property you’re looking to finance must be income-generating.
• DSCR Ratio: The DSCR ratio, calculated by dividing the gross rental income by the total housing payment, can be lower than 1, but borrowers will be subject to higher rates and fees.**
• Credit History: There is tremendous flexibility with respect to credit scores, but borrowers with lower scores will be subject to higher down payment, interest rate and fee requirements.
• Down Payment: The exact amount can vary, but lenders generally require a down payment of at least 20% of the property’s purchase price. Larger down payments are required for lower DSCRs and lower credit scores.

**Properties with very low rents and very low DSCRs are still eligible for DSCR financing, but the down payment, interest rate and fee requirements will be higher.

While we have provided a general overview of DSCR mortgage loans and their benefits, the specific interest rates and potential lenders for DSCR loans are factors that would require additional investigation. If you’re considering a DSCR loan, it’s important to consult with a JVM mortgage expert to review your options and see specific loan scenarios.

Why DSCR Loans are Ideal for Real Estate Investors

Real estate investors often face unique challenges when it comes to securing financing. Their income might not come from traditional sources, and they may have a significant amount of their wealth tied up in real estate rather than liquid assets. That’s where DSCR loans can make a significant difference, as they do not require the more traditional types of income documentation.

Income-Based

Unlike traditional loans that focus on the borrower’s personal income, DSCR loans consider the income generated by the property. This focus on property income makes DSCR loans particularly suitable for real estate investors whose primary source of income is their investment properties.

Flexible Eligibility

Real estate investors sometimes struggle to meet the strict income and employment verification requirements of traditional loans. With DSCR mortgage loans, the property’s income is the primary eligibility factor, providing greater flexibility for real estate investors.

Improved Cash Flow

DSCR mortgage loans often provide better terms than alternative types of financing available to investors with non-traditional income sources. And better terms mean better cash flow.

Ideal for Investment Properties

DSCR loans are specifically designed for income-generating properties, making them an excellent fit for real estate investors looking to finance rental or commercial properties.

No Personal Income Verification

The application process for DSCR loans is simpler than that of traditional loans because it doesn’t require personal income verification. This feature can be particularly advantageous for real estate investors with non-traditional income sources.

By focusing on the income generated by the property rather than the borrower’s personal income, DSCR loans offer a unique and flexible financing option tailored to the needs of real estate investors. Whether you’re an experienced investor or just starting out, DSCR loans could be the key to unlocking your next investment opportunity.

DSCR Mortgage Loans Nationwide with JVM Lending

At JVM Lending, we’re proud to provide DSCR mortgage loans to real estate investors across the country. We understand the unique needs of real estate investors, and our experienced team is ready to help you unlock your investing potential with our DSCR loan program.

We currently offer DSCR mortgage loans in the following states:

• Alabama*
• Alaska*
• Arizona
• Arkansas*
• California
• Connecticut*
• Delaware*
• Florida
• Georgia
• Hawaii*
• Idaho
• Illinois*
• Indiana*
• Iowa*
• Kansas*
• Kentucky*
• Louisiana*
• Maine*
• Maryland*
• Massachusetts
• Michigan*
• Mississippi*
• Missouri*
• Montana*
• Nebraska*
• New Hampshire*
• New Jersey*
• New Mexico*
• New York*
• North Carolina*
• Ohio*
• Oklahoma*
• Oregon
• Pennsylvania*
• Rhode Island*
• South Carolina*
• Tennessee
• Texas
• Washington*
• West Virginia*
• Wisconsin*
• Wyoming*

Unfortunately, we currently do NOT offer DSCR loans in the following states: Colorado, Minnesota, North Dakota, Nevada, Puerto Rico, South Dakota, Utah, Virginia, and Vermont.

No matter where you’re located, JVM Lending is committed to helping you achieve your real estate investing goals. Contact our expert team today to learn more about our DSCR mortgage loans and how we can help you finance your next investment property.

*For home purchases in this state using DSCR financing with JVM Lending, the property must be purchased in an LLC. For additional information, please contact JVM Lending or call (855) 855-4491.

Take the Next Step with JVM Lending

Our team at JVM Lending is here to guide you every step of the way. Start your JVM loan application online or contact us today to discuss your home investment goals and learn more about how DSCR loans could be the key to unlocking your real estate investment dreams.

If you are a real estate investor, you can learn more about JVM Lending’s investment financing options here.

If you’d like to get in touch with a JVM expert directly, please contact Victor Flynn at [email protected] or call (925) 478-2969

**Properties with very low rents and very low DSCRs are still eligible for DSCR financing, but the down payment, interest rate and fee requirements will be higher.