Investing in rental property can be an excellent strategy for investors to generate income, whether from a second home, Airbnb property, or small multi-family housing unit. Investing in rental properties are also scalable investments, allowing rental income to multiply by investing in a greater number of properties. In fact, residential rental properties are is often considered the safest and easiest method of investing in real estate, especially for novice investors. This blog will address the benefits of DSCR loans for rental property investors.
A Debt Service Coverage Ratio (DSCR) loan is a type of non-qualifying (non-QM) loan for real estate investors. Typically, non-QM loans allow borrowers to qualify for a loan using alternative representations to determine repayment reliability such as bank statements, liquid assets, or credit history in consideration.
However, a DSCR loan for investors is based on a property’s cash flow, rather than verification of the investor’s income or assets, allowing an investment property loan to be obtained based on the value of a rental property.
A real estate investor’s tax returns may not show qualifying proof of income due to tax depreciation deductions and allowable business expenses. Instead, with a DSCR loan, lenders forecast how much a property can generate in rent based on either current lease agreements or anticipated rent based on the appraiser’s market rent.
The annual gross rental income is simply divided by the debt obligations of the property to arrive at a ratio. Although different lenders may have variances in ratio requirements. It’s easy to see how a DSCR loan could allow both new and seasoned investors to benefit with either long- or short-term rentals by making qualifying more flexible, quicker and easier.
Importantly, DSCR loans typically have low reserve requirements. Reserve requirements mean demonstrating enough money available to pay for a required number of months of mortgage payments including principal, interest, taxes and insurance.
In addition, DSCR loans offer large loan limits, are available for multiple properties, and other a number of options such as interest-only or cashout loans, fixed or adjustable interest rates, and various lengths of term.
When you are ready to purchase your investment property, 1 Stop Lending can help you with a fast and easy lending process along with excellence in pricing and service.
Request your quote today by visiting https://1stoplending.net.