832.699.6960 Sales

832.648.3626 Support

Debt Service Cover Ratio (DSCR) Loans, a Terrific Opportunity for Real Estate Investors

To Get a Real Estate Investment Loan: It is not a requirement to get income verification for the borrower for cash flowing properties. True or False? 

THIS IS TRUE — That is what is so exciting about Debt Service Coverage Ratio (DSCR) Loans, a terrific opportunity for Real Estate Investors. These are great loans for investors wanting to own rental homes.  


At Catalyst Funding, we are passionate about real estate investing and providing unique and innovative rehab and rental property loans to meet the needs of a wide variety of investors. Investors can use these loans to own long-term or short-term rentals, including Airbnb or VRBO investment properties. We develop a comprehensive plan and provide the financing to help you achieve your real estate goals. From flexible terms to quick closings, Catalyst Funding can show you how the power of leverage can accelerate your future in real estate.  


Marco Santarelli, one of our favorite special guests on the Catalyst Funding Real Estate Market Update, reminded us recently that the Texas housing market is certainly a fascinating one to explore in 2022. Santarelli provides the latest numbers in his “Texas Housing Market Predictions 2022 & 2023” and gives his expert opinion, “If you are a house buyer or real estate investor, Texas has been one of the finest long-term real estate investments in the United States over the past decade.” 


Debt Service Coverage Ratio (DSCR) or Debt Coverage Ratio Loans are a creative option to buy rental property. Debt Service Coverage Ratio loans enable real estate investors to qualify for financing based upon property cash flow rather than personal income. These loans are ideal for investors with difficult to prove income, investors who have utilized all of their 10 Fannie or Freddie loan allotment (per spouse), those with a large portfolio of rental properties or for investors that are looking to grow their grow their portfolios rapidly. 


What is a DSCR Loan? 

If you are looking for DSCR Loan meaning or wanting DSCR Loan explained, the first thing that you need to know is what is Debt Service Coverage Ratio (DSCR)? The measurement of cash flow in relation to debt obligations is called the Debt Service Coverage Ratio, or DSCR. It is determined by dividing the rent by the PITIA (Principal, interest, taxes, insurance and association dues). DSCR reveals if a real estate property is making enough money to cover the expenses including a surplus for unforeseen circumstances. 


What are the Benefits of a DSCR Loan? 

As you consider DSCR Loan pros and cons, remember that DSCR Loans allow real estate investors to qualify for a mortgage based upon the cash flow generated by your investment property and do not require you to provide employment information and verification via tax returns, paystubs, W2s, etc. It is a less taxing documentation process for the investor and there are less requirements and rules than conventional loans.  

At a Quick Glance – Here are the most important benefits and advantages of a DSCR Loan: 

  • Personal Income is not a consideration; instead, investors qualify and borrow is based upon property cash flow making enough money to cover the PITIA. 
  • Faster closing times in some instances, due to streamlined application information based upon property not a deep dive into the individual’s personal finance and job history. 
  • One major benefit of a DSCR Loan is the Unlimited Cash-Out factor, a great option for investors to keep their real estate investment assets liquid. 
  • Rapid scalability of one’s real estate portfolio, as investors can commit to additional loans and acquiring multiple properties simultaneously. 
  • It is great for bulk purchases of large portfolios.  
  • Many investors expense rental property repair costs rather than depreciating them. This can often be a challenge when pursuing conventional loans. That is no problem with DSCR loans.  


DSCR Loans Viability – The Why and How? 

What is a DSCR Loan is an easy question to answer, but more importantly you may be asking why and how? It’s time to take this to the next level. Increasingly, real estate investors are leveraging the DSCR loan program to accomplish their real estate investment goals. Every DSCR loan qualification is based upon the property not the person. That is why debt service coverage ratio loans are the ideal scenario for real estate investors who would like to qualify for a mortgage based upon the cash flow generated by their investment property rather than using proof of income, tax returns, employment information for verification, etc.  


What are the DSCR Loan Requirements?  

Based upon the fact that DSCR loan lenders can easily identify a borrower’s ability to repay the loan without requiring income verification, it allows real estate investors to more efficiently qualify. Some investors may not be eligible for a conventional rental property loan because of the profit and loss numbers created when they deduct expenses from their properties.  


What is a Good DSCR Ratio?  

Good question! As a DSCR Loan Lender we have found that most lenders require a minimum DSCR ratio of 1.00. If a DSCR ratio is 1.25, the borrower can make loan payments and have some extra cushion. 


How do you Calculate DSCR? 

Some look for a DSCR Loan Calculator. Others just learn the basics. DSCR is calculated by dividing the rent by the PITIA (Principal, interest, taxes, insurance and association dues).  


DSCR Loan for Investment Property (Example) 

A real estate investor is considering a DSCR loan for Airbnb with a gross rental income of $100,000 and an annual debt of $75,000. When you divide $100,000 by $75,000, you get a DSCR (Debt Service Coverage Ratio) of 1.25, which means that the property generates 25% more income and cashflow in the eyes of a DSCR lender.  


Let’s Get Started – Contact Catalyst Funding Today! 

Are you ready to start owning rental homes using rental property loans? Would you like more information about DSCR loans? Would you like to check to see if DSCR loan rates today are a good fit for your real estate investment strategy?   

At Catalyst Funding, we are your one stop shop for all of your real estate investment needs. Call today at 800-915-4187 so we can help start your path to financial independence. 

On Key

Dallas Real Estate Market 2024

In 2024, the Dallas real estate market continues to stand out as a beacon of opportunity for investors and homebuyers alike. With a robust economy and steady population growth, Dallas offers a dynamic environment for real estate investment. Get monthly updates to the Dallas real estate market here!

Read More »
2024 Commercial Projections from Catalyst Funding

Texas Real Estate Market 2024

In 2024, Texas presents a promising landscape for real estate investors, boasting a vibrant commercial and residential market. Fueled by a robust economy, business-friendly environment, and growing population, the Lone Star State continues to attract eager investors.

Read More »