Greetings!
I wanted to make you aware that our rates for long term rental DSCR loans have dropped in the last few weeks. We now have rates as low as 6.875%.
In case you need a reminder on how rental DSCR loans work or simply want to learn more information about them please read on to get a better understanding on this useful product for all savvy real estate investors.
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What is a DSCR loan?
A DSCR loan, or debt service coverage ratio loan, is a type of loan that is based on the borrower's ability to repay the loan based on the income generated from the property being financed. This type of loan is often used by real estate investors who do not have the traditional credit or income qualifications required for a traditional/conventional mortgage.
How does a DSCR loan work?
To qualify for a DSCR loan, a borrower must provide the lender with documentation of the income that will be generated from the property. This documentation can includes rent rolls, leases, and other financial metrics such property taxes, insurance, and homeowner association fees. The lender will then use this information to calculate the DSCR, which is the ratio of the property's net operating income (NOI) to the monthly loan, taxes, and insurance payments. The higher the DSCR, the more likely the borrower is to qualify for a higher loan to value.
What are the benefits of a DSCR loan?
There are several benefits to using a DSCR loan for real estate investing. First, DSCR loans are often easier to qualify for than traditional mortgages. This is because a lender is not as concerned with the borrower's credit or income history. As long as the property can generate enough income to cover the monthly loan payment, the borrower is likely to qualify for the loan.
Second, DSCR loans can be used to finance a wider range of properties than traditional mortgages. For example, DSCR loans can be used to finance investment properties such multifamily, mixed-use, and other commercial use property types. Additionally, DSCR loans can be used to finance properties that have been recently renovated or that are located in less desirable areas.
Third, DSCR loans can offer more flexible terms than traditional mortgages. For example, DSCR loans can be be closed in a business entity name which keeps the loan from reporting on a borrower's personal credit report.
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What are the drawbacks of a DSCR loan?
There are a few drawbacks to using a DSCR loan for real estate investing. First, DSCR loans can be more expensive than traditional mortgages. This is because a lender is taking on more risk when they make a DSCR loan. Additionally, DSCR loans may have more restrictive terms than traditional mortgages. For example, DSCR loans may require the borrower to make a larger down payment of at least 20% or more.
Who is a good candidate for a DSCR loan?
DSCR loans are a good option for real estate investors who do not have the traditional credit or income qualifications required for a traditional mortgage or for those who need to scale their real estate purchases beyond the personal limitations banks impose upon many borrowers based on their income and current debt loads. This includes investors who are self-employed, investors with limited credit history, and investors who are looking to finance a property with a high loan-to-value ratio.
How to get a DSCR loan
To get a DSCR loan, the borrowers can start by getting a non-obligation & complimentary quote from TCW Capital Finance who specializes in this type of financing. We will then review the borrower's financial information and the property being financed to determine if the borrower qualifies for the loan. If the borrower is pre-approved for the loan, we will provide the borrower with a term sheet that outlines the terms of the loan.
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Standard DSCR Rental Loan Terms
- The minimum loan amount is $75,000
- Borrowers must have a registered business entity in good standing in their state (We do not issue personal loans)
- All properties must appraise for at least $75,000 for this program (Properties with values between $50,000 and $74,999 are allowed if you are purchasing at least 3 properties in a portfolio).
- Minimum credit score requirement is 620 (580-619 credit scores may be allowed but will require a 35%-50% down payment)
- 5, 7, 10, 30-year fixed rate options
- Rates from 6.875%
- Flexible term and interest rate options
- Up to 80% LTV on purchase & rate/term refi, up to 75% LTV on cash out
- Minimal seasoning requirements in most refinance scenarios
- No personal income requirements
- Multiple structure options available, to fit your unique investment strategy
- Fixed rate, ARMs, fully amortizing, interest only, or balloons
- Interest rate buy-down options available
- Non-recourse options available
- Flexible pre-payment options
- Accepted property types include: 1-4 units residential, 5+ unit residential, mixed use, self storage, office space, retail, light industrial, commercial business owner occupied properties, churches, triple net lease, and other special use property types will be considered.
- Borrowers must be current on all other mortgage obligations, cannot have any foreclosures on their credit report, cannot be convicted of any violent felonies, cannot have had a bankruptcy within the past 7 years, cannot have had any judgements, cannot have been prosecuted for any SEC violations, cannot have had any short sales, or cannot have been in "deed in lieu" in the last 4 years.
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Do you have a new project you're ready to discuss? Schedule a meeting using my calendar link below.
Sincerely,
Terrance Wyatt
TCW Capital Finance
Phone: 888-938-4932 ext. 700
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Solving Your Company's Financing Needs |
At TCW Capital Finance, we’re proud to offer our clients choices. We carry a comprehensive portfolio of business loans that are designed to provide you with tailored financing to meet your unique business needs. In addition to offering commercial finance options designed to help your business grow, you’ll receive personalized service from our team of experienced, friendly financial professionals. Let us help you meet your expansion, equipment, and real estate needs with our loan portfolio options.
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