Debt Coverage Ratio on Residential MF is not a thing, correct?

3 Replies

Debt coverage ratio is only for commercial loans correct?  It is not a figure I need to be concerned with for purchasing 2-4 unit MF properties?  

Is the residential loan equivalent the DTI?

@Ryan Moore I would state that it depends on the loan type that you are using to purchase the property (if you are using a loan). Some investors use commercial loans for residential properties and those commercial loans will measure debt coverage. But if you are using a residential mortgage (Fannie/Freddie if you recognize those names) then the DTI term is what is used. One thing to just make sure of is that your lender actually uses the rental income immediately to qualify you. It sounds weird but some will not use rental income until it reports on the tax returns for residential loans. Hope this helps!

Ryan,

Asset based lenders do not factor in debt or income - only credit, cash flow of property and loan to value. Most commercial lenders look at both your personal debt to income ratio and cash flow of the property to qualify. - it's called global debt service ratio - combining both personal and property income and expenses.