Use Rental Income to Qualify

 

Popular amongst our investor clients, Cashflow Loans are another option in our AMP Suite. A cashflow loan or debt service coverage ratio (DSCR) loan is a measure of the cash flow available to pay current debt obligations. DSCR is typically used by lenders to qualify a borrower for a real estate investment loan because it determines the borrower’s ability to repay the loan.

 

How do Cashflow loans work?

We want to calculate the DSCR to determine the ability to borrow and pay off the loan as the rental property generates income. Let’s say the property indicates that net operating income will be $300,000 per year, and the lender notes that debt service will be $100,000 per year. The DSCR is calculated as 3.00x, which should mean the borrower can cover their debt service more than three times given their operating income.

Criteria for Cashflow Loans

• Loan amount between $150,000 and $5,000,000.*

• Financing for up to 8 Units.

• Must be a non-owner-occupied property.

• Must have a credit score of 660 or above.

• No debt-to-income (DTI) or employment verification is required.

• DSCR must be greater than or equal to 1. (The gross rent must be greater than the mortgage payment including principal, interest, taxes, insurance, and any property association fees.)

• The borrower must have a history of owning and managing at least one property for a minimum of 12 months within the most recent 36 months on DSCR products.

• First-time investor ineligible on some Cashflow products.

*Maximum loan amount exceptions on a case-by-case basis. Additional criteria may apply.

 

Why is the Cashflow (DSCR) ratio important?

The debt service coverage ratio is important because it provides valuable information to lenders concerning a borrower's ability to sustain and pay off debts for a commercial or multifamily property. In other words, it's important to know because it helps lenders learn if their borrowers can successfully generate enough cash flow to cover their loan payments. 

There are typical borrowers who qualify for typical home loans, and then there are specialty borrowers with situations that are just different enough to require a little extra analysis. We are proud to offer a range of products designed for many different kinds of above-average borrowers - enter Arcstone Financial's Accessible Mortgage Programs or AMP.

AMP is a Non-QM or Non-Qualified Mortgage product, to learn more about these programs, please reach out to your Arcstone Financial Mortgage specialist.