DSCR (Debt Service Coverage Ratio) loans are a type of loan where the borrower’s ability to repay the loan is primarily based on the cash flow of an investment property, rather than the personal income of the borrower. The DSCR is calculated by dividing the property’s annual net operating income (NOI) by the annual debt service (principal and interest payments). DSCR loans are common in commercial real estate and in certain types of residential investment property financing.
Many banks and financial institutions offer DSCR loans, especially those that cater to commercial and investment property financing. Here are some types of institutions that may offer DSCR loans:
- Commercial Banks: Many large national and regional banks have commercial lending departments that offer DSCR loans for commercial properties.
- Credit Unions: Some larger credit unions with commercial lending departments may also offer DSCR-based financing.
- Private Lenders & Non-Bank Lenders: These lenders often have more flexible lending criteria and may be more willing to lend based on DSCR, especially for unique properties or situations where traditional financing may not be available.
- Mortgage REITs: Some real estate investment trusts (REITs) that specialize in mortgages might offer DSCR loans.
- Online Lenders: With the rise of fintech, there are now online platforms and lenders that specialize in commercial and investment property loans, including DSCR loans.
- Mortgage Brokers: Some mortgage brokers have access to a range of lenders, including those that offer DSCR loans.
It’s essential to note that terms, interest rates, and qualification criteria can vary widely between lenders. If you’re interested in a DSCR loan, it’s a good idea to shop around, compare terms, and perhaps consult with a financial advisor or mortgage broker who has experience in this area.