DSCR Loans in California:
Modern Financing for Investors

California DSCR Loan frequently asked questions

What is a DSCR loan?

DSCR stands for Debt Service Coverage Ratio. A Debt Service Coverage Ratio loan is a type of asset based loan used by real estate investors that focuses on the cash flow generated by the property rather than the personal income of the borrower. It's designed to provide investors with leverage for acquiring or refinancing rental properties based on the property's ability to generate income.

How is DSCR calculated?

Debt Service Coverage Ratio is calculated by dividing the property's Net Operating Income (NOI) by its total annual debt payments, taxes, and insurance. It's a measure of the cash flow potential of the investment property. The formula is: DSCR = NOI / Annual Debt Service, Taxes, and Insurance. A DSCR greater than 1 indicates that the property generates enough income to cover its debt obligations.

What are the minimum DSCR requirements?

DSCR Lenders typically require a DSCR greater than 1.0, indicating the property has rental income and cash flow sufficient to cover its debt obligations. Common thresholds are a DSCR of 1.0 to 1.2 or higher, although this can vary depending the specifics of the investment property. You will also need to qualify for a minimum credit score - typically a 620 minimum.

Is there a minimum credit score?

Yes, we require a 620 minimum for the FICO score.

Can I qualify for a DSCR loan without traditional income verification?

Yes, one of the main advantages of Debt Service Coverage Ratio loans is that we do not require traditional income verification. Instead, the approval process focuses on the rental income potential of the property, making it an attractive option for investors who may not qualify for traditional loans.

What types of properties are eligible for DSCR loans?

DSCR loans are available for a wide range of investment properties, including single-family homes, multi-family units, condos, and commercial properties. The key requirement is that the property generates rental income.

How long does the DSCR loan process take?

The timeline can vary, but we offer expedited processes allowing borrowers to receive a term sheet within 24 hours after application submission for their investment property. The entire process from application to funding can often be completed in a few weeks, often times much faster than traditional banks and mortgage processes.

Are there any restrictions on how I can use a Debt Service Coverage Ratio Loan?

DSCR loans are typically used for acquiring new investment properties or refinancing existing ones. The primary restriction is that the property must be intended for rental and generate income.

How do interest Rates for DSCR loans compare to traditional mortgages?

Interest rates for DSCR loans are generally competitive with traditional mortgage rates but can be higher due to the perceived higher risk associated with non-traditional income verification. Rates can vary based on your credit score, the DSCR ratio, and the loan-to-value (Total Debt / Property’s Valuation).

Starting at 6.5%, we offer the most competitive rates in the industry.

Can I use a DSCR loan for a property in any state?

We offer DSCR loans in most states.

How can I start the application process for a DSCR Loan?

To begin the application process for a DSCR loan for your investment property, simply fill out our short application form at the bottom of this page. We will get you a termsheet within 24 hours.

What makes Longleaf Lending’s DSCR loan product different than others?

We will get a termsheet to you within 24 hours, and our streamlined process ensures you can get your loan funded faster than other lenders. Furthermore, we will search for the best rate and provide several options for you to consider. We’ll work with your exit strategy to make a recommendation on the best DSCR loan for you.