Investor Debt Service Coverage Loan
Debt Service Coverage Ratio (DSCR) is a calculation that helps us determine if a rental investment is generating enough income to make its loan payment obligations. The gross monthly income must cover the subject property *Principal, Interest, Tax, Insurance & Association payment (PITIA). No need to verify personal or business income, No tax returns.DSCR is calculated by the following simple formula:
- DSCR = Monthly Gross Income
- Application, completed by borrower
- 2 months bank statement
- A list of properties you currently own (a REO Schedule)
- No Tax Returns Required
- Lease(s) – (if currently rented) or Appraisal Operating Income Statement
- Sales Contract (on purchase)
- LLC Operating Agreement or Articles of Corporations
- Driver’s License
- Other documents and/or materials may be requested based on the individual borrower’s circumstances and collateral.
- Citizens / US persons and foreign borrowers permitted, LLCs and Corporations organized in one of the fifty states or the District of Columbia
- Minimum debt service coverage ratio: 100 - 115% of PITIA
- Minimum credit score: 650
- No foreclosure, bankruptcy, deed in lieu or short sale permitted in the past 24 months.
- If foreclosure, bankruptcy, deed in lieu or short sale between 24 and 48 months, then max 65% LTV and reserves increased by 6 months. Mortgage and Rental History: maximum 1 x 30 x 12 with 0 x 30 in the last 6 months from Note DateAcceptable occupancy:
- Borrowers must sign a business use affidavit)
- 1-4 units, warrantable / non-warrantable condo.
- Condotels not permitted.
- 6 months PITIA for loan amount <$2MM; 12 months PITIA for loan amount ≥ $2MM
- Acceptable states: All 50 states and DC (US Territories not permitted). Wholesale; verify currently licensed states
ARM Index - 1-yr LIBOR;
Margins – investor-occupied 5.25%;
Caps – 2% initial, 2% each year and 5% lifetime;
Floor (lifetime minimum rate) - is initial note rate. 3-yr prepayment penalty required for investor occupancy / business purpose loans where permitted by law;
Pre Payment Penalty buyouts may be available.
Loan amounts and loan to value limits:
Investment / Business Purpose / Purchase and Rate & Term Refinance 1-4 unit, Condo
(example based on 720 min credit score)
- 70% to $1,000,000
- 65% to $2,000,000
- 55% to $2,500,000
- 50% to $3,000,000 Investment / Business Purpose Cash-out Re-fi (example based on 720 min credit score) 55% to $2,000,000 50% to $3,000,000
- Loans to one or more foreign borrowers are limited to 60% LTV and $2,500,000 Loan Amount