Debt Service Ration Loans for Investment Properties
DSCR
Your good FICO score is used to determine the interest rate
Purchasing or refinancing a rental property 1-4 units
Market rents are determined by the USPAP appraiser
Buyer/ owner pays for the rental survey from the appraiser
The property has to cash flow.
Lenders consider the cash flow ratio differently
Lenders offer these loans at 90% loan to value BUT HOWEVER
rarely will it cash flow that way. Generally you need to put a large
down payment to make the property cash flow.
Rents vs principle interest taxes insurance and HOA
Some lenders require 12 months reserves some 24 which means
all your bills on the credit report plus the one you are doing times 12 or 24
Generally does not work for a property that needs lots of health and safety code
violations or repairs. You need to be up and renting on day one of ownership.
Some lenders want you to be an experienced investor, some will work around
this with twenty four months reserves cash.
Here is how your cash is counted:
checking account in same name as vesting 100%
stock account in same name 60%
401k " " " " 60%
Questions from Bigger Pockets answered:
Hi Caroline, Thanks for the reply and information on investment ****s. My FICO is ~780. I still have A few questions on the information you gave on the post: "You also need reserves" - can that be bank account, stocks, etc. ? is it just to provide snapshots of those accounts? "You need a lease and deposit check cashed at closing" - what does that mean? how can I have a lease or deposit check if I don't own the property yet? Thanks again!
You will provide bank statements, all the pages, they need to match the name of the vesting. As in:: you are buying in an LLC and the statement is in another name. Checking account is used 100% the end of month dollar balance. Stocks 60% 401k 60%
