What is a Non-QM DSCR Loan? 🤔
A Debt Service Coverage Ratio (DSCR) loan is a type of non-qualified mortgage (non-QM) primarily used by real estate investors to finance investment properties, such as rental properties. Unlike traditional mortgage loans that focus on the borrower’s personal income, credit score, or employment history, a DSCR loan evaluates the property’s ability to generate income to cover the mortgage payments. The lender assesses the property’s cash flow through its Debt Service Coverage Ratio, which compares the property’s net operating income (NOI) to its debt obligations.
Key Features of DSCR Loan 🔑:
- Used for Investment Properties 🔒: not primary residences.
- No personal income verification 🔄: (e.g., no tax returns or W-2s).
- Approval is based on rental income of the property 📅 compared to the mortgage payment.
- Fast approval and flexible underwriting.
Typical DSCR Loan Requirements 💡
- Minimum DSCR: 🕒: Often 1.0 or higher (some lenders allow lower with higher rates).
- Down payment: 🔄: Usually 20–25%.
- Credit score: 📅: Often 620+ but varies by lender.
- Property types: 🗓️: Single-family, condos, multi-family, or short-term rentals.
Who Uses DSCR Loans?
- Real estate investors (especially those with complex income or multiple properties).
- Self-employed borrowers.
- Those looking to scale their rental portfolios quickly.
