A DSCR loan, or a debt service coverage ratio loan, is when a loan is granted for either purchases or refinances, only when the rental income covers expenses.
These loans are quickly becoming very popular because personal income or employment is not required. This works well because lenders are interested in the cash flow of the subject property, not on what you make or what kind of job you have.
If you are seeking a DSCR loan to purchase property an appraisal with rental survey is ordered. The rental survey tells the lender how much rent is to be expected based on rental comparables.
A DSCR loan for a refinance will also require an appraisal with rental survey. The rental survey tells the lender the amount of rental income the property should be able to generate.
In either scenario, if the property has the potential to generate more money than expenses, the property essentially qualifies itself.
Benefits of DSCR Loans for real estate investors include: