How to use DSCR on a mortgage for an STR?

[Tommy C.]

Hey BP!

I need some help from the pros with my question here:

How can one use DSCR to qualify for a mortgage on a short term rental property with no trailing 12 month income? (i.e. new builds)

I understand that in a typical situation, with rental history, the DSCR would have to be greater than 1.0 or 1.5, etc… but what about situations where there is no history to provide?

- Will lenders acknowledge market rent to calculate the DSCR?

- Is it only long term market rent they would acknowledge?

- What is the standard data provider for market rental rates?

I want to take the DSCR route to avoid maxing out my personal DTI ratio.

Thanks in advance!

[Jayson Cain]

@Tommy C. It depends mainly on the lender. If the property is vacant, lenders can look at the market rate and use that to calculate the DSCR when underwriting the loan. As for data providers, I know some lenders use services like RentRange or Rentometer for initial underwriting, and then the appraiser's market value during the actual underwriting. If you have a specific scenario, I'd be happy to help you run through the numbers with you.