Can anyone tell me about the DSCR Program?

[Jason Harris]

Hello 

I'm in Fairview Illinois which is in the St. Louis metro area, and I have been trying to invest in real estate for a while now. I just recently heard about the Debt Coverage Ratio Program and I was wondering if there is anyone here who can tell me more about this program. 

[Robin Simon]

Quote from @Jason Harris:

Hello 

I'm in Fairview Illinois which is in the St. Louis metro area, and I have been trying to invest in real estate for a while now. I just recently heard about the Debt Coverage Ratio Program and I was wondering if there is anyone here who can tell me more about this program. 

It is an ideal lending program for investors that are looking to scale or have trouble qualifying under traditional conventional loans (whether because of DTI concerns, no W-2 income, etc.)

The main benefits are that there is no DTI/income qualification, no tax returns required, you can borrow under an LLC, you can borrow with partners and that there are much looser limits on loan size and amount of loans you can do. Drawbacks are that the interest rates / points are going to be a bit higher than conventional (but not too much, example would be a DSCR loan might be 6.75% vs. a conventional at 5.75%). There are also typically prepayment penalties involved, which is only a drawback if you are not planning to hold for the long-term (not a concern for most DSCR borrowers).

Typically the loans are structured with 30-year terms and a fixed interest rate, but there are options to have the rate float after a few years and/or to make interest-only payments for first 10 years.

Really, the ideal loan product for the investor that is just starting out and doesn't have W2/DTI or is in scaling mode from about 5-50 properties (less than 5 typically good for conventional, more than 50 you move into institutional-level financing)