Good Faith Mortgage LLC
Request an Appointment Apply Now

DSCR Investor Mortgage Loans Overview 💼🏠

Are you an investor looking for financing based on the rental income of your property, rather than your personal income? A DSCR (Debt Service Coverage Ratio) mortgage loan could be the perfect solution! This type of loan is designed for real estate investors purchasing or refinancing income-generating properties, such as single-family rentals, multi-family units, or commercial properties.

What is a DSCR Loan? 🤔
A DSCR loan is a type of non-QM (Non-Qualified Mortgage) loan, where the borrower’s eligibility is determined by the rental income generated by the property. Lenders calculate the Debt Service Coverage Ratio (DSCR) to assess the ability of the property to cover the debt service (loan payments). In simple terms, it’s a measure of how well the income from the property can cover the mortgage payment.

For example, if the property has a DSCR of 1.0, this means the rental income from the property is equal to the loan payment. A DSCR above 1.0 means the property generates more income than required to cover the debt, which makes the borrower a more attractive candidate.

Key Benefits of DSCR Loans ✅

  • No Personal Income Verification – Unlike traditional loans that require proof of personal income, DSCR loans focus solely on the income the property generates. This is ideal for investors who may not have a traditional job or income source but own profitable rental properties.
  • Flexible Qualification Criteria – Since approval is based on the property’s income, DSCR loans are easier for investors with unconventional income or multiple properties.
  • Higher Loan Limits – DSCR loans often come with higher loan limits, allowing you to finance larger, income-producing properties that may not qualify for traditional financing.
  • Faster Approvals – The simplified approval process, which focuses on the property’s cash flow rather than the borrower’s personal financials, can result in quicker funding and less paperwork.
  • Property Cash Flow Focus – The loan approval process looks at the potential income your property can generate, rather than scrutinizing personal credit or debt-to-income ratios.

How DSCR Loans Work 💡

  • Debt Service Coverage Ratio (DSCR) – The DSCR is the ratio of the property’s net operating income (NOI) to the annual debt service (loan payments). Most lenders require a DSCR of at least 1.0, which indicates that the property’s rental income is equal to or greater than the monthly mortgage payments.
    • Example: If the property generates $12,000 in annual rental income and the mortgage payments total $10,000 per year, the DSCR would be 1.2 ($12,000 income ÷ $10,000 debt service).
    • A DSCR of 1.2 or higher is typically considered a healthy cash flow, making the loan less risky for lenders.
  • Loan Terms – DSCR loans can offer a variety of terms, including both fixed and adjustable rates. Loan terms often range from 15 to 30 years, and investors can choose options that best align with their financial goals.
  • Investor-Friendly – DSCR loans are tailored for real estate investors who need financing for income-producing properties. These loans allow investors to leverage their properties’ income to qualify for additional financing, facilitating portfolio growth.

Who Can Benefit from DSCR Loans?

  • Real Estate Investors – If you own multiple rental properties or are looking to expand your portfolio, DSCR loans provide a streamlined path to financing.
  • Non-Traditional Income Earners – If you have limited or non-traditional sources of personal income (such as freelance or commission-based work), a DSCR loan can still offer you the opportunity to secure financing.
  • Experienced Landlords & Property Managers – Investors with a proven track record of managing rental properties and generating steady rental income are prime candidates for DSCR loans.
  • Individuals Seeking Larger Investments – If you are looking to finance larger multi-family units or commercial properties, DSCR loans typically offer higher loan limits than traditional financing.

Why Choose a DSCR Loan? 🤩

  • Access to More Properties – With the ability to leverage rental income for financing, DSCR loans make it easier to acquire more properties, including larger, higher-value ones.
  • No Personal Financial Restrictions – Unlike conventional loans that heavily weigh personal credit and income, DSCR loans look at the income generated by the property, giving investors with strong rental histories a better chance at approval.
  • Customized Loan Options – DSCR loans often come with flexible terms and conditions tailored to your investment goals, including adjustable or fixed-rate options that fit your long-term strategy.