EMPIRE WEST MORTGAGE LENDING

DSCR Loans (Debt Service Coverage Ratio Loans)

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A DSCR Loan is a specialized mortgage product designed for real estate investors who want to purchase or refinance rental properties based primarily on the property’s income potential, rather than their personal income. Instead of traditional income verification, lenders use the Debt Service Coverage Ratio (DSCR) to determine whether the rental income can cover the property’s monthly mortgage payments.

This type of financing offers a streamlined and flexible solution for investors looking to expand their portfolios without the extensive documentation required in conventional loans.

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How DSCR Is Calculated

The Debt Service Coverage Ratio measures the relationship between:

Net Operating Income (NOI) ÷ Total Monthly Debt Obligations

• A DSCR of 1.0 means the property produces just enough income to cover the mortgage payment.

• A DSCR greater than 1.0 indicates the property generates more income than needed, lowering lender risk.

• Some lenders may approve loans with a DSCR below 1.0, depending on the overall strength of the deal.

 

Key Advantages of DSCR Loans

• No Personal Income Verification: Approval is based on the property's cash flow, not the borrower’s employment or income.

• Fast and Streamlined Process: Reduced paperwork and quicker closings compared to traditional loans.

• Flexible Qualification: Ideal for self-employed borrowers, business owners, and active real estate investors.

• Finance Multiple Properties: Allows investors to grow their portfolios without strict limitations on property count.

• Use for Purchase or Refinance: Available for acquiring new investment properties or refinancing existing ones.

• Short-Term and Long-Term Options: Includes fixed-rate and adjustable-rate structures tailored to investor goals.

 

Who Is a Good Candidate for a DSCR Loan?

This loan type is ideal for:

• Real estate investors expanding rental portfolios

• Borrowers who prefer asset-based qualification

• Self-employed individuals with variable income

• Investors seeking a simplified approval process

• Buyers interested in short-term rentals (Airbnb, VRBO), depending on lender guidelines

 

Why Choose a DSCR Loan?

A DSCR loan offers investors the ability to scale faster, avoid income documentation hurdles, and leverage the property’s performance to secure financing. It is a powerful tool for building long-term wealth through real estate investments.