In real estate, "Debt Service" refers to the total obligations related to a property's mortgage debt including 1st mortgage (and 2nd if applicable) principal and interest payments. If the loan is I/O (interest-only), only the interest payments are factored in. "Servicing a Debt" involves making the required payments for these monthly obligations. Lenders assess a real estate investor's ability to "service their debt" before approving loans. With a DSCR loan, this is accomplished by looking at the property's cash-flow (DSCR "ratio") since borrower's personal income is not used for qualifying.

Only a few property types are generally ineligible for DSCR loans, though exceptions may still exist depending on individual circumstances. These property types are typically excluded because lenders lack the specialized expertise to operate them in case of foreclosure, and the pool of potential loan buyers (after close the loan is sold into the secondary market - pools of large money) is much smaller compared to "mainstream" DSCR loans. These property types include rural (although we have lenders that will finance rural properties), unique homes (log, container, etc), assisted living, homes with single-room rentals w/ shared facilities (multiple leases in a 1 Unit building), and large acreage. But remember, generally DSCR loans are the most flexible residential rental loan so talk to TeamDSCR just to be sure of all your options!

DSCR loans are available to first-time investors although may contain small restrictions like a 5% lower maximum LTV or a higher credit score requirement. We do, however, have multiple lenders that have no additional restrictions if the borrower's overall financial profile is solid, and certainly if their primary is owned.

DSCR loans offer flexibility through various DSCR Wholesale Lenders with customized guidelines, unlike conventional lenders who must strictly adhere to Fannie Mae's rules. While DSCR lenders the TeamDSCR used generally have similar interest rates & terms, some specialize in specific niches, such as short-term rentals, the BRRRR Method, or negative cash flow. Their ability to make exceptions to guidelines is particularly beneficial for savvy investors looking to optimize their financing and get loans closed.

No. DSCR loans have strict requirements that prohibit borrowers from occupying these - Investment - properties. Borrowers must sign an affidavit at closing confirming they do not and will not live in the property, even in multi-unit buildings. For instance, in a 4 Unit, the owner cannot occupy any of the units, regardless of how many are rented out to tenants.

No. Unlike conventional loans, which cap borrowers at 10 properties (often fewer in practice due to DTI and title seasoning qualification difficulties as portfolios grow), DSCR loans have NO maximum property limit. Each DSCR loan is qualified based on the property's income and the borrower's credit score, rather than the borrower's overall personal income, expenses, and portfolio size.

There are different "Market Value" and "Market Rent" appraisals used depending on the subject property type. Single-family properties are valued using a standard 1004 appraisal with an additional market rent appraisal report called a 1007. Condos are valued using the same market rent 1007 report, with the market value determined by a 1073 appraisal. 2-4 Unit properties are valued with a 1025 appraisal. Within the scope of the 1025 appraisal there is a cash-flow analysis including the determination of market rent values. 5-10 Unit properties are valued using a 71A/Commercial Narrative appraisal which is an in-depth commercial market value appraisal which also determines market rents.

Yes. For DSCR loan Refinances, typically the property needs to be fully leased or have a rental income history but exceptions can be made for recent rehabs or extenuating circumstances. For multifamily properties, one or two vacant units may be allowed if they are "rent-ready." For Purchase transactions, DSCR lenders allow the property to be vacant and the DSCR will solely be qualified off the appraised market rent value (1007 or 1025 appraisal) completed at purchase.