Do You want to Invest in Real Estate?
Earn income as a real estate investor. It sounds great. Passive income. Mailbox money. Someone else paying off your mortgage. You want to be a landlord, but you have very little money. Can you invest in real estate without a substantial amount of money or credit? The answer is “Yes!”
How Can You Earn Income as a Real Estate Investor?
It is called a Debt Service Coverage Ratio Loan (DSCR). DSCR loans are designed to allow investors to purchase real estate without the need to provide income or employment documentation. Rather, the lender looks at the rental income. However, the lender will obtain an appraisal if the property is not currently rented. The lender divides the appraisal amount by principle, interest, taxes, insurance and HOA. Hence, resulting number is called the debt service ratio. So, as long as the debt service ratio number is 1 or greater (along with a few other requirements listed below), then generally the loan request will be approved.
What are DSCR Facts and Guidelines?
- DSCR loans apply to purchase loans, cash out refinances
- DSCR loans do not require personal or income requirements, as long as the property cash flows.
- DSCR loans allow put no limitation on the number of DSCR Loans allowed to an individual.
- DSCR loans include 30 years fixed, ARMS, Interest Only.
- The borrower must show three (3) months reserves.
- DSCR loans require between Ten percent (10%) and Fifteen percent (15%) downpayment.
- Minimum Credit Score 640.
- Non-Warrantable Condo are acceptable.
- Short Term Rentals allowed.
- Property may be held Personally, in an LLC, Corporation (S or C).
- Up to two (2) Million dollar loans.
- Investment Properties only.
DSCR loans have a higher interest rate than conventional loans. The lender looks at factors such as your credit score, Loan-to-Value (LTV), investor experience and the DSCR ratio. So, if you are considering a DSCR loan or a traditional loan, it is important to get the best credit score you can and keep your LTV as low as possible.
Finally, you must determine if a DSCR Loan can help you reach your financial independence goals. However, one thing is for sure, building wealth takes action, commitment and research. So, take your first action step by finding out if you qualify for a DSCR Loan.
