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DSCR Loans: A Tailored Solution for Real Estate Investors
At First Heritage Mortgage, we understand the unique needs of real estate investors. Whether you’re just starting out or you’re an experienced investor looking to expand your portfolio, our Debt Service Coverage Ratio (DSCR) Loan Program is designed to help you achieve your goals.
What Is a DSCR Loan?
A Debt Service Coverage Ratio (DSCR) loan is a mortgage designed for real estate investors, focusing on a property’s cash flow rather than personal income. This flexible loan option evaluates the property’s rental income against its debt obligations, making it ideal for building or expanding an investment portfolio.
Why Choose a DSCR Loan?
DSCR loans are specifically crafted with investors in mind, providing the flexibility and benefits you need to succeed in today’s competitive real estate market:
- No Income Requirements: Qualify based solely on the rental income generated by your investment property.
- Generous Loan Limits: Secure loans up to $2.5 million, with a minimum loan amount of $100,000.
- Flexible Terms: Choose from 30-year fixed rates or 10-year interest-only options.
- Diverse Property Options: Eligible for both long- and short-term rentals.
- Portfolio Growth: No limit on the number of properties you can finance.
How Does a DSCR Loan Work?
The Debt Service Coverage Ratio measures your property’s ability to cover its operating expenses, including mortgage payments, with its rental income. Here’s a quick example:
If your property generates $3,000 in monthly rental income and your monthly mortgage payment is $2,500, your DSCR is 1.2. A DSCR greater than 1.0 typically indicates that the property’s income covers its debt obligations, which is key for loan qualification.
Who Qualifies for a DSCR Loan?
With straightforward qualifying criteria, DSCR loans are a streamlined option for busy investors. Here’s what you need to know:
- Credit score: Most DSCR loan mortgage lenders look for a FICO score of 700 or higher.
- Investment properties only: Available for the purchase or refinance of investment properties.
- Eligible borrower types: Open to U.S. citizens, lawfully present non-U.S. citizens, and entities such as LLCs or corporations.
Key Program Benefits
- Loan-to-value (LTV) ratios up to 80%.
- Wide Eligibility: Open to both experienced and first-time investors.
- Flexible Borrower Types: Individuals, LLCs, LPs, partnerships, and corporations can apply.
- Eligible property types include:
- 1-4 unit residential properties
- Attached or detached homes
- Non-warrantable condos
Alternatives to DSCR Loans
If a DSCR loan isn’t the right fit for your investment strategy, First Heritage Mortgage offers several other financing solutions to meet your needs. Here are some popular alternatives:
- Bank Statement Loans: Instead of relying on tax returns or W-2s, these loans use your bank statements to assess income, making them a flexible option for entrepreneurs or small business owners. Learn more about Bank Statement Loans.
- Bridge Loans: A bridge loan provides short-term financing to help you secure a new property before selling an existing one. These loans are often ideal for investors and homeowners looking to quickly seize new opportunities in a competitive market. Click here to learn more.
Whether you’re exploring alternatives or need guidance on choosing the right loan, our team is here to help. Contact us today to learn more about these programs and discover which option aligns with your goals.
Ready to grow your real estate portfolio?
Contact us to learn more about a DSCR loan can help take your real estate investment strategy to the next level. Let’s work together to grow your portfolio and achieve your financial goals.
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Begin your journey towards home ownership today.