DSCR Commercial Loans
What is a DSCR Loan?
DSCR Loans, or Cash Flow Loans, are special non-qualified mortgage loans (non-QM) that use future rents to qualify. These loans are usually based off of future cash flow projections instead of investor or borrower qualifications including credit score and income. Popular ways to use this type of loan:
1. Rental Property Purchase or Portfolio Expansion
- Acquire new rental property that has positive cash flow potential but may not currently be in condition to qualify for traditional financing.
- Acquire multiple properties quickly without traditional documentation or limitations.
2. Refinancing with Low Taxable Income
- Ideal for self-employed investors or those with significant deductions to refinance out of current loan into DSCR loan if property generates rental income or positive cash flow.
3. Short-Term and Mid-Term Rentals
- Use actual or projected rental income (e.g., Airbnb, student housing rents) to qualify.
4. Corporate LLC or Business Entity Ownership
- More flexible for properties owned in LLCs or trusts than with conventional lenders.
- Avoids personal income scrutiny, as approval is based on asset performance. Useful if you have high debt to income (DTI) as a borrower or multiple rental properties.
5. Out-of-State or Remote Investing
- Streamlined process for buying in other markets and expanding rental portfolio in new cities
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Why Should You Use One?
DSCR loans are best used to finance or refinance rent producing multifamily and commercial properties, often for the purposes of rapidly expanding or diversifying rental portfolios.
This loan is not ideal if the following apply to you. Please see our other loan options available here.
- If the property has low or negative cash flow, it likely won't qualify for a DSCR loan (consider improving rents by renovating property with a hard money loan first)
- If rental income is unseasoned or unstable, or a verifiable rental history report cannot be generated to qualify rents.
- If your business or other rental properties don't generate enough income to cover the DSCR loan monthly payments.
- If you don’t have a future plan for exiting the loan (like refinancing or securing long-term financing).
- If you plan to owner-occupy any portion of the rental property.
Is This Loan Right for You?
Request your Free 30 Minute Consultation to talk with one of our experts about your real estate or business situation. We'll help you brainstorm creative loan options and explore various financing solutions.