Do you want to purchase a multi-family property but need to borrow money from a loan company to do so? If you have not applied for a loan because there are so many loan types, consider a lender who loans money to business owners who have rental properties. For instance, you can look into getting approved for a debt service coverage ratio (DSCR) mortgage loan. Your chance of getting approved for a DSCR loan is higher than other loan types because there are fewer requirements. The main thing that DSCR loan companies are concerned about is whether a borrower can pay the money back, as you will learn in this article.
What Is a DSCR Mortgage Loan?
A DSCR loan is the type of loan that lenders present to borrowers who intend to purchase a property that will be used to rent out to tenants. For instance, whether the property is a single-family rental home or an apartment complex, a DSCR loan can be applied for. A DSCR loan can also be approved for borrowers who already own such a property, but would like to refinance the property. Borrowers must prove that the monthly rent from the rental property can cover the loan repayment fee. Each lender has their own specific coverage ratio criteria that borrowers must meet for approval.
Does the DSCR Loan Approval Process Take Long?
A good reason to apply for a DSCR loan over other loan types is the speed of the approval process. You can get the money that you need for a long time as long as the coverage ratio requirement is met. The reason is that DSCR loan lenders do not require as many documents as similar lenders. For example, documents such as tax records and paystubs are not usually required as a part of the approval process. Your employment records will also not be a big concern because your rental property is your income source.
Does a DSCR Need to Be Paid Off Fast?
DSCR loans do not usually have to be paid back in a timely manner, which you might find to be an advantage. For example, rather than being given a couple of years to pay the loan back, you might have a repayment period of up to over two decades. The repayment requirements will value depending on the lender you choose. Keep in mind that there are penalties if you do not pay the DSCR loan back as agreed.
For more information about DSCR mortgages, contact a local lender.
Share6 February 2023
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