A DSCR loan is underwritten on the property rather than on you. The lender divides the net operating income by the annual debt service, gets a ratio, and lends against that instead of against your salary and tax returns. For an investor with several properties and a complicated personal return, that is often the difference between a loan and a refusal.
Ask several commercial lenders to price the same building
How the ratio is calculated, and what it has to be
Net operating income divided by annual debt service. A ratio of 1.00 means the property covers its payments exactly and nothing more; 1.25 means the income exceeds the debt service by a quarter. Commercial Loan Direct's own guide publishes conventional figures clustering at 1.20 and 1.25, and Commercial Lending USA publishes programs reaching down to 1.00 on stronger files. Unconventional Lending bands it for a borrower, treating a ratio at or above roughly 1.25 as a strong candidate for refinancing.
What it buys you in leverage
Of the firms in this record speaking about their own programs: LendingOne publishes up to 80% LTV on a rate-and-term refinance and up to 75% on cash-out; Lendmire publishes 75% as its maximum cash-out LTV with a 700+ FICO alongside it; Commercial Lending USA publishes up to 80% on one-to-four unit residential and 75% on small commercial of five or more units. Read those as maximums for the best files rather than as what your building will get.
Where a DSCR loan is the wrong tool
Two places. If the property does not yet cover its debt service, no coverage ratio will save the application and a bridge or a repositioning loan is the honest answer. And if you are refinancing your own home, this is not the product at all: DSCR lending is investment and commercial property, and an owner-occupied refinance belongs to the retail mortgage market, which this site does not cover.
Questions people ask about dscr loan
What DSCR do lenders require?
The firms in this record publish figures clustering at 1.20 to 1.25 as a conventional minimum, with some programs stated as low as 1.00. Unconventional Lending treats 1.25 and above as a strong candidate.
What LTV can I get on a DSCR loan?
Of the firms publishing their own limits: up to 80% on rate-and-term and 75% on cash-out from LendingOne, 75% max cash-out from Lendmire, and 75% on small commercial of 5+ units from Commercial Lending USA.
Do DSCR lenders check my income?
The point of the product is that the property's income carries the file. Credit still matters, and Lendmire publishes a 700+ FICO alongside its maximum cash-out leverage.