DSCR Loans, also known as Debt Service Coverage Ratio Loans, are a type of loan that considers the borrower's ability to repay the debt based on their cash flow. These loans are commonly used by businesses to finance projects or investments. The Debt Service Coverage Ratio is a financial metric used by lenders to assess the borrower's ability to service debt obligations.
At North Penn Financial, LLC, we specialize in providing DSCR Loans tailored to meet the financial needs of businesses and real estate investors. Our team of experts will work with you to understand your cash flow and financial requirements to structure a loan that fits your business goals.
Minimum Down Payment
DSCR Loans are specifically designed for professional real estate investors to use cash flow generated by the property as a qualification.
DSCR Loans are Underwritten Based on Gross Income Instead of Personal Financial History
Experienced real estate investors with multiple mortgaged investment properties and self-employed investors without W2's will often have difficulty meeting conventional loan requirements. The credit, reserves, and income requirements of a conventional are cumbersome. Bank underwriting loans using Debt-To-Income Ratios (DTI) which looks at your personal assets compared to to your personal debt. If you're trying to finance the purchase of a of rental properties with conventional loans, the payment of the new loan will be included in the debt portion of your debt-to-income calculation n ration. Whether you offset that new portion of the expected rent will depend on how well you can document the actual or expected rents from the investment property.
Real Estate Investors that have lot of personal income from non-real estate investments may be able to cover the "cash-flow gap" on their Debt-To-Income Ratio. However Investors that are self-employed or who have multiple real estate investment properties may not have the income from other sources to cove the gap. Using a DSCR Loan from North Penn Financial eliminates DTI from the underwriting and focuses on the rental income from the subject property for its monthly payments.thier
DSCR Loans Allow Investors to Borrow in an LLC or Corporate Entity
Many experienced investors prefer to borrow through an LLC or Corporate Entity for obvious reasons. This adds an extra layer of protection to the investor's personal assets for any unfortunate incidents on the property. Conventional loans can only be obtained in an individual(s) personal legal name.
DSCR Loans have a more flexible common sense limitations on the maximum numbers of properties financed
Even if a real estate investor has enough personal income to support multiple mortgaged rental properties, you will be limited to ten traditional mortgage loans. North Penn Financial does not have set limits but instead uses common sense underwriting when evaluating an investors's maximum credit expose and risk analysis.
DSCR Loans Requires Less Documentation
With a conventional mortgage you need to gather all of your paystubs, bank statements, tax documents including tax returns. The underwriters are going to do a "deep dive" into your personal financial documents and history, which is time consuming and tedious and extends your closing time. Any missing documentation or schedules on your tax return can and will lead to a delay. Since DSCR Loans focus on the value of the property and the expected cash flow of the property, plus the quality of the real estate, borrowers credit score, there's far less necessary documentation. North Penn Financial will not ask for documentation to verify your income or assets (beyond required liquid reserves to close) in most cases.
DSCR Loan Property Types
DSCR Loans Common Use
Contact us at 215-361-6900 or email us at Terry@NorthPennFinancial.com to learn more about our DSCR Loan options and how we can help you grow your real estate investment portfolio or your business.
