Hi all, I'm new to bigger pockets forum but have been a fan of the blog since maybe 2013. I've seen friends achieve success in following its guides and receiving insight from the BP community. I got rid of my social media and decided this would be a good way to interact online while also educating myself and staying informed. I've been a commercial real estate underwriter since 2012 and specifically now work as an underwriter for multifamily rental/condo construction projects nationally. In 2012-2014, I also underwrote residential loans (DTI) at a local community bank.

One thing I've noticed come up a lot is the term "DSCR Loans." I am extremely confused when I see this term because in 10 years of working in lending, I've never heard of this before. DSCR itself (the ratio) is a metric that I analyze every single day but I've never heard it used in this manner. In commercial lending, DSCR is just a metric, it's not a program or loan product, so I assumed that "DSCR Loan" really just means "Commercial Mortgage" but as I continued to google DSCR Loan trying to find a clear answer, I found differing feedback.

DSCR = NOI/annual debt service, this I know for a fact, and generally banks require 1.2x. When I search DSCR Loans I found 1) sites indicating that a bank would require a minimum 1.0x DSCR and 2) incorrect definitions/calculations of DSCR. I also found guides saying that the minimum credit score required is 620 and that there is no income verification (no W2s, tax returns, etc). I also found something saying that DSCR Loans began in 2019…?

All of this is very confusing because I can legitimately say that I am a specialist in real estate financing for investment purposes but this makes me think that this is a loan product for investors in residential 1-4 family homes held for rental, as opposed to a commercial multifamily building (5+ units or retail/industrial/office,etc.).

Lastly, as a prospective owner/investor myself looking to get into purchasing RE, is this a loan product that I could look into at a mortgage bank to purchase a house meant for long term rental or Airbnb, for example? I appreciate any feedback and guidance on this point because most of the sources I’ve found have seemed either oversimplified, inaccurate (maybe a misnomer) or possibly just foreign to me (because it’s a newer residential loan product for investment purposes). Thank you for your help!

New York City, New York

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