A Debt Service Coverage Ratio (DSCR) Investment Loan is based on the relationship between a property’s annual net operating income (NOI) and its annual mortgage debt service (principal and interest payments).
Commercial lenders analyze the DSCR to determine:
🔹 The loan amount a property’s cash flow can support
🔹 The income coverage at a specific loan amount
Two major factors in assessing commercial mortgage eligibility:
✔ DSCR (Debt Service Coverage Ratio) – Higher DSCR means more income available to cover debt.
✔ LTV (Loan-to-Value Ratio) – In some cases, the loan amount may be constrained by debt service, limiting the maximum LTV.
he DSCR calculation is rather simple. A business’s DSCR is calculated by taking the property’s annual net operating income (NOI) and dividing it by the property’s annual debt payment. The DSCR is typically shown as a number followed by x.
The formula is straightforward:
📌 DSCR = Annual Net Operating Income (NOI) ÷ Annual Debt Payment
The result is usually expressed as a number followed by “x.”
Easier Loan Qualification – More likely to qualify based on rental income rather than personal income.
Better Loan Terms – Higher DSCR increases approval chances and improves loan conditions.
Lower Interest Rates – A strong DSCR can help secure lower rates and a larger borrowing amount.
Looking to finance your investment property? Contact us today to explore your DSCR loan options!
Income Limits – Vary by geographical location, and some areas may have no limits.
Credit Score – Minimum 640+, as required by the lender.
