DSCR Loans
The most popular investment property mortgages
DSCR Mortgage Loan Program
Use the rental income from your property to qualify for financing
What is a Colorado DSCR Loan?
These days Colorado real estate investors are looking for as many advantages as they can such as low interest rates, growing location, popular areas, and an easy loan qualifying process like those offered by DSCR loans.
By choosing a DSCR loan, the lender will only use income from your rental property during the underwriting process. Without your tax returns and other income documents, it means the process is a lot easier.
The DSCR loan is the ideal choice for borrowers who want to avoid high-interest private loans in the double digits with demanding lending requirements because this type of investor loan doesn't require your personal income or employment.
The DSCR loan is a creative type of non-QM loan (also called an investor cash flow mortgage) made for real estate investors that focuses only on the investment property's rental income, your credit history, and property type. This makes it basically a no doc investor mortgage.
How do DSCR mortgage loans in Colorado work?
To qualify for a DSCR loan, the property’s rental income has to be equal or greater to the coverage ratio requirements set by the lender. The coverage ratio is calculated by dividing the monthly rental income by the new mortgage payment.
As an example, if the lender’s guideline states that the minimum debt service coverage ratio is 1.0 and the property receives $4,000 every month for rent, the highest allowed mortgage payment is also $4,000.
If the rents are just 0.75 of the proposed mortgage payment then you must either
A.) bring in more down payment funds until it is equal or pay extra for a rate buydown
or
B.) have FICO credit scores of 680 and above and accept a higher interest rate due to increased risk.
If you need to choose option "B" the rate may be .75% more than if the rent had a coverage ratio of 1 or more which is widely preferred by DSCR lenders.
Example of Debt Service Coverage Ratio calculation
A real estate investor is considering a property with a $4,200 gross monthly rental income and $3,300 monthly debt. When you divide $4,200 by $3,300 the DSCR result is 1.27, which means that the property makes 27% more income than is needed to repay the mortgage.
This is also a good signal to the lender because it shows positive cash flow. On the other hand a property with income of $3,000 per month and mortgage debt payment of $3,300 would need to pay a higher interest rate or pay an additional fee to buy down the rate.
Colorado DSCR Loan Qualifications
If the DSC is 0.75 to 0.99 you need 680 or higher credit scores
Loan-to-value: maximum LTV allowed is 85 on a purchase with 1.20 DSC and 740 credit. Otherwise it's up to 80 LTV
Loan Amounts:: $200K to $4 million
Occupancy: non-owner occupied rental property.
As of Oct. 1, 2024 in order to qualify you will need to satisfy the above:
Credit Score Requirements
The lowest possible FICO credit scores allowed for a DSCR mortgage varies from one lender to the next with a few permitting 620 scores but in general it is 660.
What are the advantages of a DSCR mortgage loan?
A DSCR real estate loan is an great choice for Colorado investors. One reason is it has easier qualifying guidelines as well as other benefits, such as:
- – No personal income or employment history is required or disclosed.
- – No limit to the number of investment properties owned or financed.
- – Title to the property can be in a corporation, LLC, and/or partnership in good standing.
- – As little as 15% down payment (zero down with gift funds or exp'd investor).
- – loan amounts from $150,000 up to $5 million.
- – Interest-only loan payment is available.
- – Non-warrantable condo investments are allowed.
- – Airbnb or VRBO short-term rental income is allowed to qualify.
- – First-time real estate investors are allowed.
See where your loan fits in this chart below
| DSCR Loan Programs | If your Credit Scores are | maximum Loan To Value | Loan Amounts | DSC may be |
|---|---|---|---|---|
| A | 740 and up | up to 85 LTV | $200,000 to $4 million | 0.75 to above 1.0 |
| B | 700 to 739 | up to 80 LTV | $200,000 to $3 million | 0.75 to above 1.0 |
| C |
660 to 699
620 to 659
|
up to 75 LTV
up to 65 LTV
|
$200,000 to $3 million |
0.75 to above 1.0
1.0 or more
|
No DSC: with credit scores above 680, you may choose to have no ratios calculated at a higher rate
LTV: loan to value maximums
Begin or increase your real estate investment portfolio. The DSCR loans we offer clients are a great mortgage alternative for both new and experienced investors, enabling you to build your portfolio without having to be concerned over qualifying with your personal income or job.
Why get a DSCR loan?
1. Your employment and personal income are not required.
2. If your tax returns, employment, or other large debts prevent you from qualifying for a traditional loan, this loan removes those roadblocks to help you get financed.
Commercial Property DSCR Loans
We also offer multifamily DSCR loans on duplex, triplex, quadplex, 5-24 unit residential bldg, mixed-use residential and commercial.
Just inquire here for a custom quote.
Areas Served
We serve borrowers across the state of Colorado which includes the following cities and adjacent area:
- Aurora
- Denver
- Centennial
- Fort Collins
- Arvada
- Parker
- Grand Junction
- Englewood
- Longmont
- Colorado Springs
- Lakewood
- Golden
Disclosure: Minimum loan amount is $200,000 for residential. Loan programs are subject to change per lender at any time until the loan is approved and the rate is locked. Borrowers must be approved by underwriting. Not all applicants will qualify.