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DSCR stands for Debt Service Coverage Ratio. This is a tool that helps a borrower's ability to repay a loan by evaluating the property's monthly rental income.

DSCR is a straightforward method of measuring cash flow, determined by dividing the monthly rent by the total monthly costs, which include the principal, interest, taxes, and insurance (together known as PITIA).

For commercial and mixed use property, DSCR is calculated by dividing the annual Net Operating Income (NOI) by the annual debt service (PITI). The difference with this approach is you are including the other operating expenses like utilities, maintenance, management fees, janitorial services, etc.

To calculate the DSCR, divide the subject property's rental income by the monthly PITI (principal, interest, taxes, and insurance).

Keep in mind that for commercial and mixed use properties they use Net Operating Income divided by PITI.

Minimum Down Payment
DSCR loans, also known as investment property loans, Non-QM loans, or rental loans, have become very popular lately. But why all the buzz? While investors can still get traditional loans or funds from small banks, these options are difficult to qualify for and require significant cash reserves. DSCR loans are made for real estate investors and use the rental income from the property to help qualify for the loan.

Based on the Property's Rental Income, Not Your Income
Experienced real estate investors or self-employed people without W-2s often have trouble meeting the strict requirements of conventional loans. DSCR loans don't use DTI at all. Instead, they look at the property's rental income compared to the loan payments, making it easier for investors to qualify.

Borrow Through an LLC or Entity
Many investors prefer to borrow through an LLC or corporation to keep their personal information private and protect their other assets. Conventional loans can only be taken out in an individual's name, but DSCR loans allow you to borrow through an LLC or other business entity.

DSCR Lenders Are More Flexible on Property Limits
With conventional loans, even if an investor can afford to take on several mortgages, they can only get loans for up to ten properties. Most DSCR lenders don't have a set limit.

Require Less Documentation
DSCR loans focus more on the property's value and rental income, as well as your credit. As a result, there is less paperwork needed.

While it is best to discuss your specific scenario with one of our Loan Agents, here are some general requirements:

Minimum Credit Score
We don't have a minimum credit score, even though most DSCR lenders only go as low as 660 or 680.

If you don't meet the credit requirements for a DSCR loan, you may be a better fit for our Hard Money loan option.

Minimum Down Payment or Equity
We can go as high as 85% LTV on purchase loans, and 80% LTV on refinance, depending on the property type, credit and DSCR ratio.

Minimum Property Value
We have a minimum property value of $100k. If you own multiple investment properties worth over $50k, ask us about our blanket loan option.

Minimum Loan Amount
Most lenders have a minimum loan amount of $100k. We can go as low as $75k.

When comparing DSCR loan lenders, it's important to consider rates and fees, lender experience with investors, prepayment penalties, and whether they allow financing through an LLC or corporate entity. Choosing a lender who has a solid track record and a specialized focus on real estate investors can make a big difference in the loan process.

At Trulo Mortgage, all property types are considered, including 1-4 residential, 5+ multifamily, commercial, and mixed use. The only property types we try and stay away from is special use commercial property such as gas stations and churches.

Yes! We can do DSCR loans for rural properties. There may be certain acreage limits, and the property can't be used for agricultural business purposes.

We have options from no prepayment penalty to 5 years. The longer the prepayment penalty, generally, the lower the rate and cost will be.

Good news! Your property is still eligible if it is vacant, as long as it is still in a livable condition. This applies to purchases, refis, and cash outs. Most lenders require the property to be tenant occupied for a refinance. We do not!

Yes! We allow short term rental income for our DSCR loans. Reach out to your Loan Agent for more details.

That's ok, we work with all DSCR ratios, it just impacts your rate. Reach out to your Loan Agent for more details.