DSCR Loan insight

[Omar Doyle]

Does anyone have any information on DSCR loan, they can sure, It would be greatly appreciated.... Thanks!

[Mark Towey]

Quote from @Noah Wright:

Hey Omar,

Welcome to the real estate world! BiggerPockets gets better with every new member, so we're glad to see you here! DSCR (Debt Service Coverage Ratio) loans are a popular option for investors because they come with several key benefits that set them apart from traditional loans. Here's a quick breakdown of why they might be a good fit for you:

1. No Personal Income Requirements (No DTI): Unlike conventional loans, DSCR loans don't rely on your personal debt-to-income (DTI) ratio. The loan approval is based on the property's rental income covering the mortgage—making it easier for investors without traditional income streams to qualify.
2. LLC Protection: Many DSCR lenders allow you to hold the property in an LLC. This is a huge plus because it offers liability protection, meaning your personal assets are shielded if there are any legal issues with tenants or the property.
3. Doesn’t Appear on Your Personal Credit: One of the big perks is that these loans don’t get reported on your personal credit profile, so they won’t impact your credit score or debt visibility. This is especially helpful if you plan to continue investing and don’t want multiple mortgage loans affecting your credit report.
4. Streamlined Process: Since DSCR loans are focused on the property's cash flow rather than personal financials, the approval process can be quicker and less documentation-heavy compared to traditional mortgages.

If you want more info or need help getting started, feel free to reach out! A mortgage broker specializing in DSCR loans can help you find the lowest pricing for your specific transaction out of hundreds of potential lenders. Happy to help anytime --

 Hey Noah, 

I wanted to ask a follow up question from your explanation of DSCR loans. If a lender bases the loan off the property's rental income, I'm curious how do they determine that amount of rental income? Is it based of similar properties near by that are for rent or are the lenders somehow able to find out what similar homes that are alike it are renting for? What if a property is slightly rundown and would need to have some renovations done before it could rent out for fair market value, would a DSCR loan still work for that?