DSCR Loans

A DSCR (Debt Service Coverage Ratio) loan is a type of commercial loan that is based on the income generated by the property rather than the borrower's personal income. DSCR loans are often used for income-generating properties such as apartment buildings, office buildings, and retail spaces.

The Debt Service Coverage Ratio is a measure of the property's ability to generate enough income to cover the loan payments. The DSCR is calculated by dividing the property's net operating income by the total debt service (the principal and interest payments on the loan).

DSCR loans are best suited for borrowers who are looking to purchase or refinance a commercial property with a strong cash flow. The borrower's personal credit score and financial history may be considered, but the primary focus is on the property's ability to generate enough income to cover the loan payments.

To qualify for a DSCR loan, the property typically needs to have a DSCR of at least 1.25, although the exact requirements can vary by lender. Borrowers may also need to provide documentation of the property's income and expenses, as well as their own financial statements.

Overall, DSCR loans can be a good option for borrowers who are looking to purchase or refinance a commercial property with a strong cash flow. The loan terms can vary depending on the lender and the borrower's financial profile, but DSCR loans typically have longer repayment terms and lower interest rates than other types of commercial loans.