Private & Hard Money Loans
(For Your Real Estate Investments)
A Debt Service Coverage Ratio (DSCR) real estate loan is a financing option designed for real estate investors seeking to purchase or refinance income-producing properties. Unlike traditional loans, which often rely on the borrower’s personal income and creditworthiness, DSCR loans focus on the property’s ability to generate sufficient income to cover the loan payments.
The DSCR is the ratio of the property’s Net Operating Income (NOI) to its annual debt service (annual loan amount).
DSCR = Net Operating Income (NOI) / Debt Service (Annual Loan Amount)
For example, if a property generates $10,000 annually in NOI and the annual debt service is $8,000, the DSCR is 1.25.
Our funding criteria typically requires a DSCR of at least 1.0, meaning the property’s income must at least cover the loan payments. Higher DSCRs (e.g., 1.25 or above) may qualify for better terms like lower interest rates.
Your personal income and employment history are less critical. The loan is approved primarily based on the property’s financial performance.
Our LTVs typically range between 65% and 80%,
Consider a rental property with the following financials:
Monthly Rental Income (NOI): $4000.00
Monthly Loan Payment: $3200.00
The DSCR would be calculated as:
DSCR = 4000 / 3200 = 1.25
This means the property generates 25% more income than needed to cover the loan payment. Based on its strong DSCR, this loan might also receive favorable terms, such as a lower interest rate or higher LTV ratio. DSCR loans provide a straightforward pathway for investors to expand their portfolios without strict reliance on personal financial documentation, focusing instead on the cash flow potential of their investments.
