A Debt Service Coverage Ratio (DSCR) loan is a type of mortgage specifically designed for real estate investors. Unlike traditional loans that require proof of personal income, DSCR loans are approved based on the income generated by the investment property itself. Lenders assess the property's rental income to determine if it can cover the mortgage payment, making this an attractive option for investors who may not meet standard income verification requirements.
Eligibility for DSCR loans is primarily based on the investment property itself, but typical borrowers are:
Individuals or entities looking to purchase or refinance rental properties and use them for investment opportunities
DSCR loans are attractive to those who may not have traditional W-2 income or prefer to qualify based on the property's income potential rather than personal income.
From seasoned investors expanding their portfolio to newer investors starting their journey, DSCR loans can be a viable option.
A reasonable credit score is usually required, though it may be more flexible than traditional mortgages.
The property will need to be appraised to determine its market value and potential rental income.
The property's projected rental income must meet a minimum DSCR threshold set by the lender (e.g., a DSCR of 1.2 or higher, meaning the income is at least 20% greater than the loan payments).
DSCR loans offer several advantages for real estate investors:
Qualifying is primarily based on the property's cash flow, not your personal income, makes it easier for investors, especially those who are self-employed or have complex income situations.
Many DSCR loan programs do not require extensive personal income documentation, streamlining the application process.
DSCR loans are specifically designed for investment properties, recognizing the unique financial dynamics of rental real estate.
DSCR loans can enable investors to expand their real estate portfolios more efficiently by leveraging property income for financing.
With less emphasis on personal financial documentation, DSCR loans can sometimes close faster than traditional mortgages.
Ed Fussell NMLS #309042
Mercantile Mortgage Corporation, a div of Bankers Residential Mortgage Corporation
NMLS #1657876
Mercantile Mortgage
1401 N. CENTRAL EXPRESSWAY SUITE 100
Richardson, TX 75080
Company Phone:
(972) 661-9988
Operation Manager Cell:
(972) 333-9914
Bankers Residential Mortgage Corporation DBA Mercantile Mortgage Corporation is an equal housing lender. This is not a commitment to lend or extend credit. Programs, rates, terms and conditions are subject to change without notice. Terms and conditions apply. All rights reserved. Contact us for details. Consult your accountant about tax deductions.
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CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE BANKER OR A LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.
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