How to Purchase Your Next Rental Property without any income documentation!Jan 11, 2023
Today, we are talking DSCR loans - no income doc home loans for your real estate investors! You can qualify for a DSCR with no income documentation. Which means, no submitting paystubs, W-2s, tax returns or paystubs. To get pre-approved, you only need to submit your bank statements showing your cash to close and a photo ID.
Let me tell you why I love no income doc loans. Number one, because the work landscape has changed. Millennials have increased their incomes at record levels during the past two years; became creators, some have left Corporate America, and others are figuring things out…and with these changes, they have generated the income to invest in things like real estate. The DSCR loan allows those of you to still participate in the real estate marketplace, W-2 job or not!
What is a DSCR loan?
A DSCR loan is short for a Debt Service Coverage Ratio Loan, which means…how well can this asset service the debt. This type of loan is asset-based lending, where we use the property itself to qualify you…hence, no need for any income documentation. In other words, how well can the rental income cover the monthly mortgage payment.
What are the benefits of a DSCR loan?
Convenience because you’re not drowning in paperwork; let me add your home loan experience should be super tech savvy to where you’re not lifting a finger. Full doc or no doc.
DTI is irrelevant. If you’re carrying a lot of debt, the DSCR loan creates your opportunity to keep building. Let me add, carrying good debt to build your legacy is a move in itself! Either way, we do not need to take into account your credit report or income at all. We do look at credit score!
Purchase in your LLC, trust or corporation. Each real estate investment property should be vested in its own entity, so if one goes down, the others don’t.
Property can be vacant or occupied. If the property is vacant, we’ll use an appraisal to provide the projected rental income. If the property is occupied, we’ll use the rental income from the lease agreement.
How to calculate the DSCR ratio?
For most Mortgage Lenders, a DSCR ratio of 1.00 is required. So you’ll take the rental income divided by the total proposed monthly mortgage payment to calculate the DSCR ratio.
$2,600 rental income / $2,200 mortgage payment = 1.18 DSCR Ratio = This works!
Are DSCR loans hard money?
This is a commonly asked question, and my answer is a quick, no. Hard money is not intended for long-term use; hard money is for fix-and-flip deals or a bridge loan when you’re purchasing a new home before selling your previous home. Whereas DSCR loans are loans with 30 yr fixed terms.
Should I do a DSCR loan or full doc loan?
DSCR loans are the best loans for entrepreneurs and real estate investors. This way you can easily get qualified, keep taking your tax deductions and keep your properties separate from your personal finances.
Beginner and experienced investors are welcome. 660 credit score. 20-25% down payment. $150K loan minimum. 3-6 months reserves. Must own a primary home. Property doesn’t need bells/whistles, just needs to be habitable.
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