What is the role of a DSCR loan?
A DSCR loan is specifically designed for investors who prioritize cash flow and property performance. These loans emphasize the property's ability to generate income (DSCR) rather than the borrower's personal credit score or income history.
Related Questions
What is DSCR?
DSCR stands for Debt Service Coverage Ratio. It's a key financial metric used to assess a borrower's ability to repay their debt obligations. It's calculated by dividing the borrower's net operating income (NOI) by their total debt service.
How is DSCR calculated?
DSCR is calculated using the following formula: \n\n DSCR = Net Operating Income (NOI) / Total Debt Service \n\n NOI represents the income generated from a property after deducting operating expenses. Total Debt Service includes principal and interest payments on all loans associated with the property.
How does DSCR affect loan affordability?
DSCR directly impacts loan affordability. A higher DSCR means the borrower can afford a larger loan amount while still maintaining a healthy financial cushion. Lenders use DSCR to determine the maximum loan amount they're willing to offer.