Loans Based on Rents

[Jason Barton]

Hello,

I am looking to invest in a multiunit property, but I am nearing the debt to income ratio most banks require. I do not have the funds to pay all cash for the properties I am looking at. I am curious as to how specifically loans work that is based on rents? As I understand most look at the income against expenses and assume a 10-20% vacancy factor.

1. Are there general rules for these kinds of loans (i.e. rent must exceed expenses and debt servicing by X %, down payment requirements )?
2. Are the specific banks that focus on these kinds of loans?
3. Assuming the rent pencils out is your debt to income still a factor?

Any guidance is most appreciated

Regards

Jason

[Nick Belsky]

@Jason Barton

I am a mortgage broker in Texas and have access to several lenders whom do DSCR loans.

In a nutshell:

Income, Employment, and DTI aren't a factor.

It's all about the property, your cash down, and credit worthiness.

The DSCR calculation is generally NOI/PITIA = DSCR

Some lenders will go as low as .75% DSCR but will want more money down. 1.00% is the standard, some drop rate is over 1.25%.

I've learned there are many different nuances in the UW requirements for these loans based on each other. No two programs are the same.

How that gives some insight.

Nick Belsky