What is a DSCR Loan?
theresa rolen • January 23, 2025
What's the Buzz About DSCR Loans?
What’s the Buzz About DSCR Loans? 🤔
Hey there, future real estate investor! 🏠 Are you dreaming of owning rental properties and making money while you sleep? Sounds awesome, right? But how do you get the money to make that dream a reality? Enter DSCR loans—your new BFF in the world of real estate financing. 💸
What Is a DSCR Loan? 🧐 DSCR stands for Debt Service Coverage Ratio. (Whoa, big words! 😅) But don’t worry, it’s pretty simple. This type of loan helps you buy rental properties, and instead of focusing on your personal income, lenders look at how much money the property can make. In other words, can the rent from the property cover the loan payments? If yes, you’re golden! 🌟
Why Use a Broker for a DSCR Loan? 🤝 Sure, you could go loan shopping on your own, but why not let a broker do the heavy lifting? Here’s why teaming up with a broker is a smart move:
- They’re Loan Experts 🧠: Brokers know all the ins and outs of DSCR loans. They can find the best deal for you without you having to stress about it.
- More Options 🛍️: Brokers have access to multiple lenders, not just one bank. That means more choices and better chances of scoring a loan with awesome terms.
- Save Time ⏳: Life’s busy! Let the broker handle the paperwork, comparisons, and fine print while you focus on planning your rental property empire. 👑
What Do You Need to Qualify? 📋 Here’s the good news: DSCR loans are pretty flexible. But there are still a few things lenders look for:
- Down Payment 💰: Most lenders want at least 20% down. If the property is $300,000, you’ll need $60,000 ready to go. Saving up? You’ve got this! 💪
- Credit Score 🌟: Aim for a credit score of 620 or higher. The better your score, the better your loan terms (think lower interest rates). So, keep those payments on time and your credit healthy! 💳
- Property Income 📈: Remember the DSCR? Lenders want the rent to cover your loan payments. If it’s a strong rental market, you’re in luck! 🎉
Consumer Tips for DSCR Loans 💡 Want to make sure you’re set up for success? Here are some tips to keep in mind:
- Do Your Homework 📚: Research the rental market where you’re buying. High demand areas with steady rental income are your best bet.
- Budget Wisely 📝: Besides the down payment, don’t forget about closing costs, property taxes, and maintenance expenses. Make sure you’re financially prepared.
- Work on Your Credit 🏦: If your credit score needs a little boost, take steps to improve it before applying. Pay down debts and check your credit report for errors.
- Understand DSCR Requirements 🤓: Each lender might calculate DSCR a bit differently. Ask your broker to explain how they measure it and what’s required.
- Have a Backup Plan 🛠️: Even with a great rental property, things can go wrong. Keep some savings aside for unexpected repairs or vacancies.
The Big Takeaway 🎯 DSCR loans are a fantastic tool to help you grow your rental property dreams without stressing about your personal income. And teaming up with a broker? That’s the cherry on top! 🍒 They’ll guide you to the best deals and make the process smooth and stress-free.
Ready to start building your rental property empire? Let’s go! 🚀
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When a Pre-Approval Isn’t Actually Approval Why Realtors Can’t Afford to Blindly Trust Every Lender In today’s market, getting an offer accepted isn’t the hard part. Getting it to close is. Lately, I’ve been pulled into multiple “rescue missions”—offers accepted, homes taken off the market, timelines set… only for the deal to start unraveling once underwriting gets involved. Different buyers. Different lenders. Same root problem. A pre-approval that never should’ve been issued . A Real Scenario Realtors Are Seeing More Often A buyer submits what looks like a strong offer. The pre-approval checks the box. Everyone moves forward. But once the file is examined: Less than two years of work history Variable income only (hourly, commission, fluctuating pay) Prior history? Straight out of high school This doesn’t mean the buyer can’t qualify. It does mean the file requires precision , not assumptions. The Truth About Pre-Approvals (This Is the Part That Matters) A pre-approval is only as strong as : the income used to qualify it the guidelines actually followed and the lender who understands the difference between “maybe” and “mortgageable” Variable income + limited history isn’t impossible — but it requires structure, documentation, and time . What it does not tolerate is shortcuts, guesswork, or optimism disguised as confidence. Where Deals Start to Break Many weak pre-approvals rely on: Income that hasn’t been averaged long enough Pay that looks good on paper but doesn’t meet guideline requirements Front-end approvals that haven’t been reviewed by underwriting Everything looks fine—until underwriting gets involved. And underwriting always gets involved. What Buyer’s Agents Should Be Asking (Without Playing Underwriter) You don’t need to know every lending rule. You do need to ask smarter questions. 1. Is the buyer’s income salaried or variable? If it’s variable, averaging and seasoning rules apply. 2. How much of that income is actually being used to qualify? Not projected income. Not potential income. Qualified income. 3. Does the buyer meet the full two-year work history requirement? If not, how is the gap being documented and justified? 4. Has an underwriter reviewed this income yet—or is this a front-end pre-approval? This affects how much risk the seller is taking on. 5. What’s the backup plan if income is reduced or disallowed? Strong lenders already know the answer. If those answers aren’t clear, the offer isn’t strong—no matter the price. Why This Matters for Sellers When a seller accepts a shaky offer: The home comes off the market Showings stop Leverage disappears If the deal collapses late, sellers lose time, momentum, and often negotiating power. A strong offer isn’t just about price. It’s about: financing that survives underwriting a lender who answers the phone and a buyer who is truly qualified The Realtor Takeaway Trust is important. Verification is smarter. The best agents don’t just get contracts signed—they get them closed . Ask better questions. Vet the lender. And remember: hope is not a lending strategy. Book time to chat My Calendar Theresa Rolen, Loan Originator NMLS# 2249004 | Brokerage NMLS #1850081 Cell 913-705-0049 Email Theresa@SummitLendingUSA.com Theresa Rolen Cell (913) 705-0049 Trolen.myjourney@outlook.com
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