Debt Service Coverage Ratio

A debt service coverage ratio (DSCR) mortgage, also known as an investor cash flow mortgage, enables you to finance an investment property using rental income instead of your personal income. In short, a DSCR mortgage enables you to purchase or refinance a rental property without providing your tax returns, W-2s, pay stubs or other personal and financial documents that are required for a standard mortgage. There is no employment or income verification. Properties titled in the name of an LLC are permitted.

Debt Service Coverage Ratio Requirements:

• The rental income generated by the property must meet or exceed the lender's coverage ratio requirement.
• The coverage ratio equals monthly rental income divided by the mortgage payment and typically ranges from 1.0x to 1.5x, depending on the lender and borrower.
• Some lenders requires a minimum 20% down payment.
• An appraisal with rental survey is required. The rental survey tells the lender how much rent is to be expected based on rental comparables.