Tag Archive for: DSCR loans

How to Get a DSCR Loan in Three Quick and Easy Steps

Categories:

Today we are going to discuss how to get a DSCR loan in three quick and easy steps. Getting a DSCR loan doesn’t have to be complicated. In fact, with the right approach, you can close your loan quickly and start cash flowing from your investment property.

If you’re ready to secure funding without worrying about personal income requirements, follow these three simple steps.

Step 1: Get Your Numbers Ready

Lenders don’t ask for pay stubs or tax returns for a DSCR loan. Instead, they focus on your property’s income. That means you need to gather the right numbers before applying.

Here’s what you need:

  • Expected Rent Income – Find out how much rent your property can bring in each month. A lease agreement or a rental appraisal from a property manager can help.
  • Monthly Expenses – Lenders look at costs like mortgage payments, taxes, insurance, and HOA fees.
  • Loan Terms You Want – Decide whether you prefer a 30-year, 40-year, or interest-only loan.

Example: Sarah owns a rental property that earns $2,000 per month. Her monthly expenses, including mortgage and taxes, add up to $1,600. Since her rent covers her costs, she has a strong DSCR ratio, which makes her loan approval much easier.

Step 2: Find the Right DSCR Lender

Not all lenders offer DSCR loans, and those that do may have different requirements. You’ll want to shop around and compare terms.

Look for lenders who:

Example: Mark applied for a DSCR loan at his local bank, but they required personal income documents. He switched to a lender that focused on rental property loans and got approved in days—without personal income verification!

Step 3: Apply and Close Your Loan

Once you’ve gathered your numbers and chosen the right lender, it’s time to apply. Most DSCR loan applications require:

  • A completed loan application
  • A property appraisal
  • Proof of rent income (like a lease or appraisal report)

After you apply, the lender will review your numbers, order an appraisal, and finalize your loan. This process usually takes 2-4 weeksExample: Lisa submitted her DSCR loan application with all the needed documents. Because she had her numbers ready and worked with an experienced lender, she closed in just three weeks.

Get Your DSCR Loan Today!

By following these three easy steps—preparing your numbers, finding the right lender, and applying—you’ll be on your way to securing a DSCR loan fast.

Do you need more info on how to get a DSCR loan in three quick and easy steps? Contact us today to find out more! 

0 Comments/by

DSCR Loans Help BRRRR Properties

Categories:

Today we are going to discuss how DSCR loans help BRRRR properties. When you are looking to grow your real estate portfolio, DSCR loans can be a great tool. They work well with the BRRRR strategy. In this article, we explain what DSCR loans are and how they help with BRRRR properties.

What Are DSCR Loans?

DSCR stands for Debt Service Coverage Ratio. First, DSCR loans help you see if a property’s income can cover its monthly loan payments. Next, these loans focus on the money the property makes instead of your personal income. For example, if you buy a rental home, the rent you collect helps pay the loan.

What Is the BRRRR Strategy?

BRRRR is an easy way to build wealth with real estate. It stands for:

  • Buy: Find a good property.
  • Rehab: Fix it up.
  • Rent: Let tenants live there.
  • Refinance: Get better loan terms.
  • Repeat: Do it all over again.

Each step is simple, and DSCR loans can fit into this plan very well.

How DSCR Loans Fit with BRRRR

First, DSCR loans let you buy properties based on how much money they make. Because of this, you do not need to show a lot of personal income. This step helps you buy more properties.

Next, when you fix up a property, the rent increases. Thus, the DSCR improves. In addition, this makes it easier to refinance later.

Then, after you rent out the property, the income covers the DSCR loan payments. As a result, you can focus on growing your portfolio.

Finally, when you refinance, you can use the property’s cash flow to get better loan terms. Therefore, you can use the money to buy another property. In short, DSCR loans work as a cycle that helps you repeat the BRRRR process.

A Simple Example

Imagine you buy a small rental home. First, you fix it up with DSCR financing. Next, you rent the house to a family. Then, the rent helps cover the loan payments. Finally, you refinance the property for a lower rate and more cash. As a result, you can buy another home. This example shows how DSCR loans help you move from one step to the next easily.

Benefits at a Glance

  • Easier Qualification: DSCR loans focus on the property’s income. Therefore, you can qualify even if your personal income is modest.
  • Stronger Cash Flow: When the rent increases, the DSCR improves. In turn, this leads to better refinancing options.
  • Growth Opportunity: With DSCR loans, you can buy, rehab, rent, refinance, and repeat. This cycle helps you build your portfolio faster.

DSCR loans can help your BRRRR properties Today!

Overall, DSCR loans can be a smart way to fund your BRRRR projects. They help you use the property’s income to move forward. Moreover, by following the BRRRR steps, you build wealth step by step. So, if you are ready to grow your real estate investments, consider how DSCR loans might work for you.

Contact us today to find out how DSCR loans can help your BRRRR properties.

0 Comments/by

DSCR Loans and Credit Scores: What You Need to Know

Categories:

Investing in real estate can be an exciting journey. But, when it comes to financing, things can get a bit tricky—especially if your credit score isn’t where it needs to be. Don’t worry, though! There are ways to improve your situation and get the best possible terms on a DSCR loan. Today we are going to discuss DSCR loans and credit scores! Let’s take a closer look!

What is a DSCR Loan?

First things first, what is a DSCR loan? DSCR stands for Debt Service Coverage Ratio. In simple terms, it’s a type of loan used by real estate investors. This loan measures the ability of a property’s cash flow to cover its debt. In other words, lenders use the DSCR to see if your rental income is enough to pay off the loan you’re asking for.

Why Credit Scores Matter for DSCR Loans

Your credit score plays a huge role in getting approved for a DSCR loan. A higher credit score means you’re more likely to get better loan terms, like a lower interest rate or a higher loan-to-value ratio (LTV). On the flip side, a lower credit score can make it harder to qualify, or it may result in less favorable terms.

Example:

Imagine you have a credit score of 680 and want to finance 80% of a $312,000 property. You might get an interest rate of 8.8%. But if your credit score were 760, you could lock in a rate as low as 7.45%. That difference could save you over $200 a month!

The Credit Usage Problem

One of the biggest factors affecting your credit score is how much of your available credit you’re using—this is called your credit utilization rate. If you’re using more than 30% of your credit limit, your score might take a hit. Many investors don’t realize that even if they’re making payments on time, maxing out credit cards can drag their scores down.

Introducing the 911 Usage Loan

Here’s where the magic happens! If your credit score isn’t high enough to qualify for a good DSCR loan, there’s a solution: the 911 Usage Loan. This is a short-term, private loan that helps you pay off your credit cards. Once those balances are paid off, your credit score could jump up—sometimes by 100 points or more!

How It Works:

  1. Simulation: First, you’ll run a credit simulation using tools like MyFICO or Credit Karma. This shows you how much your score could increase if you pay off your credit cards.
  2. Loan Approval: If the simulation shows that your score will improve enough to make a difference, we’ll move forward with the loan.
  3. Pay Off Credit Cards: The 911 Usage Loan pays off your credit cards, reducing your credit utilization rate.
  4. Watch Your Score Rise: As soon as your credit card balances update, your credit score should increase, sometimes dramatically.

Real-Life Example:

A recent client in Texas had a credit score of 653. After using a 911 Usage Loan to pay off his maxed-out credit cards, his score jumped to 753! This change not only helped him qualify for better loan terms but also saved him a significant amount of money each month.

The Business Credit Card Trick

Another smart move is to transfer your credit card balances to business credit cards. Unlike personal credit cards, most business cards don’t report your usage to personal credit bureaus. This means you can keep your personal credit score in good shape while still having access to the credit you need for your investments.

Note: Be cautious with Capital One business cards, as they still report to personal credit bureaus.

Why This Matters

Improving your credit score can have a big impact on your real estate investments. Not only can you qualify for better loans, but you can also increase your cash flow. And in some cases, having a higher credit score is the difference between getting approved or not.

Get a 911 Usage Loan Today!

If your credit score is holding you back from getting the best DSCR loan, consider a 911 Usage Loan. It’s a short-term solution that could set you up for long-term success in real estate investing.

0 Comments/by

How Flexible Are the Rules and Guidelines?

Categories:

When you’re investing in real estate, finding the right loan is crucial. If you’re considering a DSCR (Debt Service Coverage Ratio) loan, you may wonder how flexible are the rules and guidelines. Are all DSCR lenders the same? The short answer is no.

Let’s dive into the details and see how DSCR loans work and what flexibility you can expect.

DSCR Loan Rules Vary by Lender

Unlike traditional loans, which are tightly regulated by Fannie Mae or Freddie Mac, DSCR loans are different. Each lender has its own set of rules. This means that what works with one lender might not work with another.

For example:

  • Some lenders will only approve loans for 1-4 unit properties.
  • Others may allow financing for condos, short-term rentals, or even commercial properties.
  • Some may offer lower down payments, while others might require more equity.

Example: Short-Term Rentals

Not every lender will finance a short-term rental property like an Airbnb. But some lenders specialize in these types of loans. If you’re looking to finance a short-term rental, you’ll need to find a lender that’s open to these kinds of properties.

Credit Score and DSCR Ratios Can Vary Too

Another big area of variation is credit scores and DSCR ratios.

Here’s what to expect:

  • Some lenders may approve borrowers with a credit score as low as 620.
  • Others may require a higher score, such as 680 or 700.
  • The DSCR ratio requirement can also change. Some lenders want at least a 1.1 DSCR, while others may be more flexible.

Example: Credit Score Flexibility

Imagine you have a credit score of 650. One lender might deny you, but another could approve your loan with a slightly higher interest rate. Shopping around for the right lender is key here.

Types of Properties That Can Be Financed

Another area where flexibility shines is the types of properties that qualify for DSCR loans. While many lenders stick to simple 1-4 unit properties, others venture into more unique investments.

Some lenders will approve loans for:

  • Mixed-use properties (part commercial, part rental)
  • Rural properties
  • Larger properties like 24-plexes
  • Portfolio loans (multiple properties under one loan)

Example: Mixed-Use Properties

Let’s say you have a building that’s both retail space and residential units. Some lenders won’t touch this. However, there are DSCR lenders who specialize in mixed-use properties.

Loan Amount Limits

Minimum and maximum loan amounts also vary from lender to lender. Some lenders have a minimum loan size of $150,000 or even $300,000. Others may be more flexible and accept loan amounts as low as $50,000.

Example: Small Loans

If you need financing for a smaller project, like a $75,000 loan in a rural area, many lenders won’t help. But there are DSCR lenders out there who specialize in smaller loans.

Pricing and Interest Rates Differ, Too

On top of all the flexibility with the rules, pricing also varies. One lender might offer you a lower interest rate for the same type of loan, while another could charge more based on their guidelines and risk assessment.

Example: Interest Rate Differences

Let’s say you’re shopping for a DSCR loan for a 4-unit property. You could find one lender offering a 6% interest rate, while another lender quotes you 7.5% for the same loan type.

Why Shopping Around Matters

As you can see, DSCR loan guidelines are far from universal. That’s why it’s important understand how flexible the rules and guidelines are for different lenders. Whether you have a smaller project, a rural property, or a unique portfolio, there’s a lender out there who will work with you.

0 Comments/by

What is the best option: Interest Only vs Amortized

Categories:

When deciding between DSCR interest-only vs amortized loans, it’s important to know the difference and how each option impacts your cash flow and long-term goals. Both types of loans have pros and cons, so let’s break them down.

What is an Interest-Only Loan?

With an interest-only loan, you pay just the interest on the loan for a set period. This means your monthly payments are lower during the interest-only phase. However, after that phase ends, you’ll need to start paying down the principal, which increases your payment amount.

Example:

Imagine you take out a loan for $100,000 with an interest-only period of 5 years at 5% interest. During that time, you’ll pay $417 per month. Once the 5 years are over, you’ll start paying the principal, so your payment will jump higher.

Pros:
  • Lower monthly payments at the start.
  • More cash flow for other investments or expenses.
  • Flexibility if you plan to sell or refinance before the principal payments kick in.
Cons:
  • No reduction in the loan balance during the interest-only period.
  • Payments can jump significantly after the interest-only phase.
  • If the property doesn’t increase in value or if you don’t sell, you could be stuck with a higher payment.

What is an Amortized Loan?

With an amortized loan, you pay both the interest and a portion of the principal from the beginning. This means your monthly payment stays the same, and over time, more of your payment goes toward reducing the loan balance.

Example:

Let’s say you have the same $100,000 loan with a 5% interest rate, but it’s amortized over 30 years. Your payment would be about $537 per month. While that’s more than the interest-only loan, each month you are paying down the loan, and your balance decreases steadily.

Pros:
  • Steady payments that stay the same over time.
  • You build equity in the property right away.
  • Lower total interest costs over the life of the loan.
Cons:
  • Higher payments upfront compared to an interest-only loan.
  • Less cash flow for other investments or expenses.

Which Option is Best?

The best option depends on your strategy and goals. Here’s how to decide:

  • Short-Term Strategy (Interest-Only): If you’re planning to hold the property for a short time, or if you need maximum cash flow now, interest-only might be the way to go. You get lower payments upfront and can use that extra money for other investments. But be careful! When the interest-only period ends, your payments will go up.
  • Long-Term Strategy (Amortized): If you’re in it for the long haul, an amortized loan makes more sense. You’ll build equity over time and won’t face a big payment jump later. It’s a safer bet if you plan to hold onto the property and want to slowly pay off the loan.

Final Thoughts

Choosing between interest-only vs amortized loans depends on your situation. If cash flow is tight and you expect to sell or refinance soon, interest-only might work better. But if you want stability and long-term equity, an amortized loan is usually the safer choice.

Now that you understand the difference, you can pick the loan that fits your goals best!

0 Comments/by

Is a DSCR Loan Right for You?

Categories:

If you’re a real estate investor looking for an easier way to qualify for financing, a DSCR loan might be the solution. Unlike traditional loans, DSCR loans focus on the income from your rental property instead of your personal or business finances. Whether you’re new to investing or you like to keep your taxes lean with write-offs, this loan could be your ticket to growing your portfolio. Is a DSCR loan right for you? Let’s take a closer look!

What is a DSCR Loan?

A DSCR loan stands for Debt Service Coverage Ratio. It’s a mouthful, but simply put, it’s a loan for real estate investors. This type of loan focuses on rental properties and doesn’t require proof of your personal or business income. That means even if you started your business yesterday, you might still qualify!

Unlike traditional loans, the DSCR loan is based on whether your rental property will break even or better.

Who is a DSCR Loan For?

DSCR loans are designed for real estate investors looking to buy or refinance rental properties. If you:

  • Are just starting out in real estate investing
  • Don’t show much income on your tax returns (because you write off expenses)
  • Have a good credit score and want to focus on rental properties

Then, a DSCR loan could be a perfect fit for you.

This loan is ideal for people who don’t want to show income or haven’t been in business for two years. Many investors who just quit their jobs and started investing in real estate can benefit from this product because they can qualify without needing two years of income.

Key Benefits of DSCR Loans

  1. No Personal or Business Income NeededWith traditional loans, lenders often want to see two years of income history. But DSCR loans only care about the property’s ability to cover its debt.
  2. Rental Income is What Matters
    DSCR loans don’t rely on your tax returns. Instead, they check if the rental income will cover the property’s mortgage and expenses.
  3. Flexible Options
    You can use DSCR loans for single-family homes and even properties with up to four units. There are also portfolio options for multiple properties and mixed-use loans for special cases.

The DSCR Loan Formula

How does a DSCR loan work? It’s all about the numbers. The lender looks at the rent your property brings in or could bring in. This is called the Debt Service Coverage Ratio. If the rental income covers your mortgage, taxes, and insurance, you’re good to go!

Example:
If your property rents for $1,000 a month and your mortgage and property expenses total $900, you have a good DSCR ratio, and you’re in a solid position to qualify.

Three Things Lenders Look For

To qualify for a DSCR loan, lenders will check:

  1. Rental Income
    The property should break even or have positive cash flow. The lender will only consider five things: your mortgage payment, property taxes, insurance, HOA (if applicable), and flood insurance (if required).
  2. Credit Score
    Higher credit scores mean better rates. The higher your score, the better the deal you’ll get.
  3. Loan to Value (LTV)
    How much money are you borrowing compared to the value of the property? A lower loan-to-value ratio means less risk for the lender and better terms for you.

When is a DSCR Loan Not Right?

While DSCR loans are great for many investors, they aren’t for everyone. Here are a few cases where a DSCR loan may not be the best choice:

  • Owner-Occupied Properties: You can’t live in the property if you use a DSCR loan. It’s strictly for rental properties.
  • Fix and Flips: DSCR loans aren’t ideal for short-term investments like flips because they often come with prepayment penalties.
  • Other Options Available: If you have solid income and qualify for a traditional loan, you might want to explore that route for better rates and no prepayment penalties.

Conclusion: Is a DSCR Loan Right for You?

If you’re looking for a long-term rental property investment and don’t want to deal with showing income or tax returns, a DSCR loan is a great option. It allows you to invest in rental properties with fewer hurdles, focusing on the property’s performance instead of your personal finances.

To see if it’s the right fit, run the numbers, look at your credit score, and make sure the property will at least break even. And, as always, it’s wise to shop around and get the best rate possible!

0 Comments/by