DSCR Loans to Buy Rental Property

How does a DSCR purchase loan work?

It comes down to one number.

Step 1. The rent. Long-term rent from a lease, short-term rental income like Airbnb, or the appraiser's estimate of market rent if there's no tenant yet.

Step 2. The monthly payment. Principal, interest, taxes, insurance, and association dues if there are any.

Step 3. Divide the rent by the payment.

The rent covers the payment with room to spare. That's what I want to see.

These numbers are an example to show the math. They are not a quote.

What do I need to qualify?

I'm looking at the property, not your paycheck.

I don't ask for your tax returns, your pay stubs, or your employer.

I still look at your credit, your down payment, and sometimes some money in reserve.

And it has to be a rental. This loan is not for a home you live in.

What kinds of rental property can I buy?

More than single-family homes.

Duplexes, triplexes, and fourplexes all work. So do condos and townhomes.

I can even go up to 10 or 20 units.

Long-term rental with a lease, or a short-term rental. Both can qualify.

How much do I need to put down?

Most investors expect 20 to 25 percent down.

I have DSCR loans that go as low as 15 percent down for the right borrower.

Every deal is different, so let's look at yours.

Can I buy the property in my LLC?

Yes. That's the one most people don't know.

A lot of loans make you buy in your own name. With a DSCR loan, the property can be titled in your LLC at closing.

Tell me up front if you plan to use an LLC, so we set the loan up that way from day one.

Can I use a DSCR loan to buy an Airbnb or vacation rental?

Yes. Short-term rental income can qualify the loan.

Underwriting may look at it a little differently than a long-term lease, because a short-term rental has more chance of empty nights.

That goes for a cottage on Lake Sunapee, a place on Lake Winnipesaukee in NH's Lakes Region, or a condo three states away.

Check the town's short-term rental rules before you fall in love with a place. They change from town to town.

And call me before the offer, not after.

Why should I send you the address before I make an offer?

Taxes and insurance are part of the payment.

A two-family in Lebanon, New Hampshire and one across the river in White River Junction, Vermont can carry very different tax bills.

Same rent. Different ratio.

Send me the address first, and I'll run the number with you. A good Realtor and a good loan officer working together can set the deal up right from the start.

Is a DSCR loan a good fit for self-employed investors?

It's built for it.

You write off everything you legally can, and your tax return says you barely made a dime. Great in April. Tough when you want a mortgage.

With a DSCR loan, I don't even ask for the return.

What should I have ready?

You don't need any of this to ask a question. It just speeds things up.

• The property address
• The rent, from the lease or what you expect it to bring in
• The tax bill and an insurance quote, if you have them
• Association dues, if any
• Your own name or your LLC
• Where your down payment is coming from

DSCR purchase questions

How much rent does a property need to qualify for a DSCR loan?

I divide the rent by the full monthly payment. A ratio of 1.0 means the rent equals the payment. I like to see room to spare, like rent of $2,400 on a $2,000 payment.

Can I buy a duplex, triplex, or fourplex with a DSCR loan?

Yes. Two to four units all work, and I can go up to 10 or 20 units.

Do I need landlord experience to get a DSCR loan?

No. You don't have to have owned property before. First-time investors and first-time home buyers can use a DSCR loan to buy a rental.

Can I buy a vacation rental on Lake Sunapee or Lake Winnipesaukee with a DSCR loan?

Yes. Short-term rental income can qualify the loan. Check the town's short-term rental rules first, and call me before you make the offer.

What if the property has no tenant or no lease yet?

The appraiser can estimate what the property should rent for, and I can use that number to qualify. That works for a long-term rental or a short-term rental.

Can I live in the property part of the year?

No. A DSCR loan is strictly for an investment property. If you plan to live there, we'd look at a different loan.

Which states do you do DSCR loans in?

I work with investors on rental properties in most states. Send me the address and I'll tell you if I can help there.

Your next step

Serving with integrity. Closing with confidence.

DSCR loans are for rental and investment property. Not an offer to lend or a commitment. Every loan is subject to approval.
Derek Tsakiris, NMLS #1007898 | NEXA Mortgage, LLC NMLS #1660690 | Equal Housing
NMLS Consumer Access: www.nmlsconsumeraccess.org