A Debt Service Coverage Ratio (DSCR) loan is a type of loan that allows borrowers to qualify for a loan based solely on the cash flow generated by their investment property, rather than on their personal income 1. Here are some benefits of DSCR loans:
Easier qualification: DSCR loans are typically easier to qualify for than traditional loans, as lenders do not need to verify the borrower’s personal income 2.
More flexible terms: This type of financing can offer more flexible terms, when compared to traditional property loans. This might include longer repayment terms and lower interest rates 23.
Faster closing times: DSCR loans don’t require proof of income. Instead, borrowers can qualify based on the property’s cash flow, offering faster closing times and more flexible funding solutions 4.
More specifically, DSCR loans provide the following additional benefits:
No income verification
No job requirement
Down payment of only 20%
Can purchase under an LLC
No experience required
Cash out refinances allowed
Property can be vacant at the time of financing
Multiple property types may be eligible
Easier to qualify
Less documentation required
Please note that there are also some disadvantages to this type of loan that should be considered. For example, if your debt-service coverage ratio is too close to 1, you’re considered to be vulnerable and even a little drop in cash flow could cause you to default on your loan 1. It’s important to weigh the pros and cons before deciding whether a DSCR loan is right for you.
Author
Larry L. Gilmore
President & CEO
ClearBlu Capital Group
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