Cash flow
Lease and market rent
The lender may compare the lease, appraisal market rent and the projected housing expense under its own calculation method.
Rental-property financing
DSCR loans built around the property.
Qualify an eligible investment property primarily through its rental income rather than personal employment income.
The basic idea
Rent divided by estimated housing expense.
DSCR stands for debt service coverage ratio. A common approach divides qualifying monthly rent by monthly principal, interest, taxes, insurance and association dues.
A ratio of 1.00x generally means the gross rent equals the estimated monthly housing expense. Lenders may calculate the ratio differently and may have programs for ratios below 1.00x, subject to other factors.
What lenders review
More than one ratio.
Property
Value, condition and use
The property must be eligible, marketable and non-owner-occupied. Appraisal, title, insurance and transaction history matter.
Borrower
Credit, reserves and history
Employment income may not qualify the loan, but credit depth, liquidity, entity documents and experience can affect the program.
Small balances are the specialty
Need less than $100,000?
Explore detailed guides for the loan-size range that fits your property.
A real property, not just a ratio