When you are embarking on the process of acquiring an Investment Property Loan, it is important to have a knowledgeable team behind you that knows all the tricks of the trade. Valor Lending Group is the lending team you can trust! We provide the highest quality of customer service in the lending industry, getting your project funded quickly, and efficiently with Valor at your side every step of the way!
Contact Dave for immediate attention to your Loan Scenario!
Investment Property Loans help real estate investors, like yourself, buy and hold for rental income or fix and flip for a quick profit.
Valor Lending Group offering new DSCR 1-4 Unit Investment Property Loans | 15% Down on a DSCR loan up to 1.5 Million | Minimum 680 middle FICO score | Zero Reserves
Today property investment loans have competitive financing for residential properties and they have Cash-Out refinancing available for investment properties that you may currently own.
The National Association of Home Builders (NAHB) conducted a recent examination on rental housing using U.S. Census data.
They found that 86% of rental properties in the U.S. are single family residences; two-to four-unit residences being the next most common type of rental property.
Valor Lending Group has multiple funding sources for these types of rental property loans.
What is a DSCR Loan?
Sometimes called “Investment property loan” or “rental loan,” “no tax return investment property loan” does not consider a borrower’s income in the traditional sense.
The “cash flow” is just the monthly rental amount the investment property brings in. For example, an investment property renting for $2,000/month would be attributed a qualifying income of $2,000/month. The main requirement for these investment property loans is that the monthly rents cover the monthly expenses. It is that simple.
Not only is a borrower’s income not considered in the loan application process, but investment property lenders also do not request income amounts there is no income verification of any kind. No letters from employers, no W2s, and no pay stubs! Again, the income of the investment property is simply the cash flow of the property.
What is Rental Debt Service Coverage Ratio (DSCR)?
The DSCR = Properties Current Rents / New PITI (principal, interest, taxes, and insurance) monthly Payment. If your property is collecting rents that cover your current PITI Payment your property debt services aka your property’s rents cover your total mortgage payment.
Example of DSCR Calculation: New P&I = $1,851.26 + 758.53 taxes + $147 insurance = $2,756.79 PITI | $3200 Current Rents/$2756.79 = 1.16 DSCR
Debt service coverage ratio (DSCR) is one of many financial ratios that lenders assess when considering a loan application. This ratio is especially important because the result indicates to the lender whether you’ll be able to pay back the loan with interest. A ratio over 1 is good, and the higher the better.
The minimum DSCR a lender will demand depends on macroeconomic conditions. If the economy is growing, lenders may be more forgiving of lower qualifying ratios.
Here’s how to interpret your Investment Property DSCR:
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- DSCR < 1: You have negative cash flow. You don’t have enough rental income to service the debt (New PITI payment).
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- DSCR = 1: You have exactly enough rental coming in to service the debt (New PITI payment), but you don’t have an additional cash cushion.
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- DSCR > 1: You have positive cash flow. The higher your DSCR, the more income you have to service the debt (New PITI payment).
DSCR – Example
For example, assume an investment property is rented for $2,000/month. Assume also the property has the following monthly expenses.
Principal & Interest $1,000/mo
Property Taxes $250/mo
Insurance $120/mo
HOA Dues $130/mo
TOTAL PITIA $1,500/mo
In this example, the DSCR = $2,000 Monthly Rent / $1,500 Monthly PITIA = 1.33.
No-tax-return investment property lenders generally want to see a DSCR above 1.00, and sometimes offer better pricing if the DSCR is above 1.25-1.50.
Advantages & Disadvantages of Investment Property DSCR Loan
1) Pros of a No-Tax-Return Investment Property Loan
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- No tax returns required
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- No employment or income required
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- Personal or business income is not considered
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- No debt-to-income (DTI) ratio was developed or considered
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- Allows real estate investors and self-employed individuals to qualify when they otherwise cannot
2) Cons of No-Tax-Return Investment Property Loan
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- Larger down payment than traditional loans
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- Rates are slightly higher than traditional loans (but not much more)
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- Some (but not all) lenders require landlord experience
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- Personal credit still plays a role
DSCR Investment Property Loan Highlights:
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- No Tax Returns
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- Employment NOT Required
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- No Income Required
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- No Debt to Income Ratio Calculated
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- Cash Flow based on Subject Property rents | if the property is vacant upon purchase market rents from the appraisal will be used to calculate DSCR
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- SFR, Condo and 1-4 Unit
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- Maximum Loan $2.5M | Purchase and R/T Refinance
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- Maximum Loan $2M | Cash out Refinance
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- Unlimited Financed Properties OK
Don’t let the rising rate prevent you from acquiring more investment properties!
We also have solutions to access capital through a refinance with rate that will let your properties cash flow.
CONTACT ME TODAY for immediate attention to your scenario
