DSCR Loans for Real Estate Investors
At Macoy Capital, we meet the financing needs of real estate investors with a variety of flexible loan programs. From DSCR loans to ground-up construction loans, fix and flip loans and others, we enable borrowers to meet their financing goals for a wide range of investment properties. A DSCR, or debt service coverage ratio loan is a unique financing option that is well-suited for specific scenarios.
Benefits of Our DSCR Loan Program
By choosing Macoy Capital as your DSCR lender, you will benefit from a straightforward lending process. Our team of real estate financing experts recognizes the importance of a quick approval when buying a rental property, and we focus on delivering a hassle-free, fast approval to our borrowers.
Your interest rate and loan term directly affect your mortgage payment and the cash flow of your rental property. We work closely with applicants to optimize the profitability of their investments with competitive rates and terms.
Our talented team at Macoy Capital has more than 40 years of combined loan experience, and our extensive knowledge paves the way for a better financing experience. We proudly guide our borrowers through a fast, low-stress loan process while taking time to ensure that our customers are fully aware of their options and terms.
How to Apply for a DSCR Loan
When you are ready to apply for DSCR loans near me, reach out to loan experts online or apply online to begin the process.
Contact Macoy Capital
Call our team at (310) 424-3587 for full details. You can also complete the form below, and we will be in touch soon.
Complete the Loan Application Online
Your streamlined mortgage loan process begins when you apply for your new debt service coverage loan. Complete the application online, and we will be in touch soon to review the loan terms in detail.
How to Apply for DSCR Loan
Contact Us
Loan Application
Lending Guidelines for Debt Service Coverage Ratio Loans
- Asset / Project Types
- Income-producing investment properties, including 1-4 family residential properties, multi-family properties and mixed-use properties
- Loan Terms
- Up to 30 years, fully amortized with interest-only options up to 10 years; prepayment penalties may apply
- Loan-to-Value
- Up to 80%, depending on the loan amount and other qualifying factors
- Transaction Types
- Purchase, rate/term and cash-out
- Loan Amounts
- Starting at 6.5% fixed
- Interest Rates
- Starting at 1.5%
- Origination Fees
- Starting at 1.0%
- Borrower Recourse / Guarantees
- Full recourse
- Lending Markets
- Major metro and secondary markets throughout the U.S.
Frequently Asked Questions (FAQ)
What is DSCR?
DSCR means debt service coverage ratio. This ratio describes the income property’s ability to cover its debt obligations based on its rental income. This type of loan requires the property to generate at least enough income to cover the mortgage payment and expenses (property taxes, insurance, and any HOA fees if applicable). When the property breaks even, you have a 1.0 DSCR. Many DSCR lenders require a 1.20 or 1.25 DSCR, depending on the property type and loan scenario. This means that the operating income is 20% or 25% higher than the property’s monthly obligation. Our team at Macoy Capital will analyze your property upfront to provide you with specific terms that apply to your loan request.
When should you use a DSCR loan?
A DSCR loan is only available for investment properties that produce rental income. It is not an option for vacant properties, such as fix and flip projects, or for owner-occupied residences. Underwriting for this type of loan is heavily dependent on the property’s ability to cover the expenses. However, lender requirements may extend to the applicant’s credit score, background and other factors to a lesser degree in some instances.
Who provides DSCR loans?
DSCR loan programs are offered by private lenders specializing in investment property financing. Lenders that exclusively have programs for owner-occupied properties or non-investment properties will not offer this type of financing.
How does a debt service coverage ratio loan differ from a traditional mortgage?
With a traditional loan, the applicant must meet specific requirements based on credit score, personal income and other similar qualifications to qualify. Traditional loans are based on the applicant’s ability to repay the mortgage. A debt service coverage loan relies on the property’s operating income as a qualifying factor. To qualify for a DSCR financing program, the property’s income must cover or exceed the property’s monthly obligations. The operating income is used for this purpose, and some lenders have a specific reserve requirement as well.
What are the terms of a DSCR loan?
DSCR loans, which are Non-QM loans, are available with varying terms depending on the loan amount, property type, cash flow and other qualifying factors. The minimum loan amount is typically $100,000, and these loans have terms available up to 30 years. Fully amortized, interest-only with options for fixed or adjustable rates.
What is the loan-to-value ratio for DSCR loans?
For a debt service coverage ratio loan, the maximum loan-to-value is typically 80%. However, some property types and loan scenarios have a lower maximum loan-to-value. In addition, the maximum loan-to-value for a purchase loan is based on the lesser of the sales price or the property value.
What are the pros and cons of DSCR loans?
DSCR loans have both benefits and drawbacks. Understanding these pros and cons is imperative as you search for the right financing option for your current needs.
Pros
Accessibility: Because these loans are underwritten based mostly or entirely on the DSCR, they are more accessible to applicants who are new investors as well as those with unique credit and personal income situations.
Fast Approval Process: In many cases, applicants do not need to provide personal financial documents for approval. As a result, the loan process for these loans can be significantly faster than for traditional loans.
No Property Limits: Traditional loans have a limit on the number of properties that a borrower can purchase. This allows investors to build their property portfolios more quickly.
All Income-Producing Properties Are Eligible: Properties that produce rental income are eligible for debt service coverage loans. This includes both short-term and long-term rentals. Single-family, condo and townhouse properties qualify. In addition, properties with two or more units qualify.
LLCs: Applicants can apply under their personal names or under an LLC. An LLC offers benefits like protection for your personal assets and credit. It also minimizes the number of applicants who need to have a personal guarantee.
Jumbo Loans: For real estate buyers who are interested in high-end properties, jumbo loans may be available to cover larger loan amounts.
Cons
High Interest Rate: DSCR loans are viewed as riskier to the lender than traditional loans that are underwritten on the borrower’s qualifications. Because of this, they often have higher interest rates and may include a prepayment penalty.
Large Down Payment: Debt service coverage ratio loans generally have a lower loan-to-value than traditional mortgages. The down payment requirement is often a minimum of 20%.
Limited Qualifying Properties: The minimum loan amount is typically $100,000, so these loans may not be suitable when buying a smaller, less expensive property. In addition, only income-producing properties qualify. In addition, rural properties and properties without comps nearby may not qualify.
No Fix and Flip Properties Allowed: Since DSCR loans have a long term with a prepayment penalty, they are not suitable for fix and flip projects. Applicants should plan to own and manage their rental property for several years or longer depending on the term of the prepayment penalty.
