What exactly is a DSR loan?

[Jennifer Stammberger]

David Greene mentioned a DSR loan in one of his recent youtube videos which I've never heard of. If I understood it correctly-it's simply a loan that does not use your W2 to qualify but the lender would look at the property's cash flow it's supposed to generate & if the numbers cover the mortgage, that loan would be approved?! Can someone clarify for me? This sounds way too good to be true lol.Thanks :) 

[Kristen L Garner]

Hi Jennifer! There is an entire category of loan called non conforming or non-QM. DSCR (Debt Service Coverage Ratio) falls into this category. The loan product is specifically for investment properties and is usually good for 1-10 units. You qualify based on the DSCR ratio (rental income divided by total monthly PITI payment). If that number is greater than 1.0 you will have no issues getting DSCR financing. If that number is greater than 1.25 you will start to see a nice drop in the rate. The guidelines vary slightly lender to lender and product to product. But below are some major points.

-credit should be over 660, but over 700 to get best terms

-80% LTV on single family, 75% LTV on multi family or first time investor

-6 month seasoning period to do a refi

-can close in personal name or LLC

-loan minimums are usually either $75k+ or $100k+

-need to show 6 months reserves in any combination of bank accounts, stocks, retirement accounts, etc

-rates are higher than conventional

-no taxes, income, W2, etc needed

-take 30 days to close

-pre payment penalties can be added to lower the rate

-up to 3% of purchase price can be given in seller concessions

-if purchasing as a short term rental be sure to tell your lender first (to make sure they have a product that fits)

-if purchasing a rural property be sure to tell your lender first (to make sure they have a product that fits)