A DSCR (Debt Service Coverage Ratio) loan is a type of mortgage designed for investment properties, where the loan qualification is based primarily on the property's cash flow rather than the borrower's personal income.

The DSCR is calculated by dividing the property's net operating income (NOI) by its total debt obligations. A DSCR greater than 1 indicates the property generates sufficient income to cover its debt payments.

Minimum DSCR requirements vary by lender, but typically, a ratio of at least 1.25 is preferred, indicating the property generates 25% more income than needed to cover debt payments.

Credit score requirements differ among lenders; however, a minimum FICO score of 620 is commonly required, with higher scores potentially securing better loan terms.

Down payment requirements typically range from 20% to 30% of the property's purchase price, depending on factors like property type, credit score, and DSCR.

Yes, many lenders offer DSCR loans to first-time investors, though there may be additional requirements or restrictions, such as lower leverage or higher credit score minimums.

Yes, certain lenders provide DSCR loans for properties intended for short-term rentals, though they may require evidence of rental income history or projections.

Typically, lenders require the property's financial statements, rent rolls, property appraisal, and sometimes the borrower's personal financial statements and tax returns.

Yes, many lenders allow borrowers to take out DSCR loans under a business entity, such as an LLC, which can offer liability protection and potential tax benefits.

Some DSCR loans may include prepayment penalties, which are fees charged for paying off the loan early. It's important to review the loan terms with your lender to understand any potential penalties.