A DSCR- Debt Service Coverage Ratio Mortgage is a mortgage that is qualified from rental income on an investment property.  

The DSCR is the ratio of cash available for servicing the debt (mortgage) which is generally the principal and interest mortgage payments. The DSCR is a benchmark used in measuring the entity’s (a person or a corporation) ability to cover the debt payment.  The higher the DSCR the more likely the income produced from the property will service itself.

The income from the borrower is not examined as no tax returns or W2’s are required.  For this type of loan, the borrower typically needs a credit score of 740 or higher.

DSCR is calculated as follows:

DSCR = Net Operating income / Annual Debt Service

Example of DSCR:  Net Operating Income =$40,000 / Annual Debt Service =$32,000

$40,000/$30,000 = 1.25% DSCR

A DSCR of 1.25% or greater is considered optimal and as long as the entity has the required down payment, reserve assets and good credit the request would get approved and funded.  There are some programs that allow at 1.1% DSCR.

The team at Integrated Lending Group has funded thousands of these types of California loans.  You can feel confident they will provide you with the best loan options and rates for your DSCR loan.

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