Buying rental property near campus? DSCR loans explained
A DSCR loan qualifies a rental property by its own cash flow instead of your personal income. Here is how it works.
What DSCR means
DSCR stands for debt service coverage ratio. In simple terms, it compares the income a rental property is expected to earn with the cost of the loan and property expenses. If the property's income covers the costs, it can support the loan.
Why investors use these loans
Terms, down payment requirements and costs differ from standard owner-occupied financing, and they are set by the wholesale lender.
- The property's cash flow is the focus, rather than your personal tax returns and pay stubs.
- They can be useful for self-employed investors and people building a portfolio.
- They are used for residential investment properties of one to four units.
What to prepare
- A lease or a rental income estimate for the property.
- Information on the property's taxes, insurance and any association dues.
- Evidence of funds for the down payment and reserves.
Tallahassee's rental market
With several large universities and a steady stream of state-government employment, Tallahassee has long been an active rental market. Whether a particular property makes sense is a question of its numbers, so run them before you buy.
Run your scenario
Tell us about the property you are considering and a licensed originator can explain what the options might look like. There is no obligation to ask.
Questions about your situation?
Tell us about your loan and a licensed originator will follow up. There is no obligation to ask.