For More Information: (833) 457-6500
For More Information: (833) 457-6500
Investment Property
Mortgage Programs Available for Investment Property Financing
1. Conventional Investment Property Loans
- Overview: Ideal for properties that meet Fannie Mae and Freddie Mac guidelines; available for single-family homes, townhomes, condos, and multi-units.
- Requirements:
- Minimum credit score typically 620+
- Down payment usually 20%–30%
- Proof of stable income and assets
- Debt-to-income ratio capped around 43%
- Sufficient property reserves (cash on hand after closing)
- Benefits: Competitive fixed or adjustable rates, no upfront mortgage insurance, flexible terms.
2. DSCR (Debt Service Coverage Ratio) Loans ( See Below )
- Overview: Designed specifically for real estate investors; qualification based on rental income (property cash flow), not personal income documents.
- Requirements:
- Minimum DSCR of 1.0–1.2 (property must generate enough income to cover loan payments)
- Down payment typically 20%–30%
- Minimum credit score—often 660+ (varies by lender)
- Properties must be income-generating
- Benefits: Fast streamlined qualification, can buy in your name or LLC, suitable for expanding portfolios, ideal for those with complex income or many properties.
3. Jumbo Investment Property Loans
- Overview: For large financing needs above the standard conforming loan limits (currently $806,500 for single-family homes).
- Requirements:
- Minimum credit score as low as 660 for some programs
- Higher down payments (often 20%+)
- Proof of income and assets
- Benefits: Enables financing for luxury or high-value properties, including multi-unit buildings or vacation homes.
4. Home Equity Line of Credit (HELOC)
- Overview: Use the equity in your current home to access cash for investment property purchases or improvements.
- Requirements:
- Sufficient available home equity (typically at least 20%)
- Good credit standing
- Income and debt assessment
- Benefits: Revolving credit access; borrow only what you need, when you need it; lower interest rates than personal loans; can be used for down payment, rehab, or other purposes
Debt Service Coverage Ratio (DSCR)
DSCR Loans: The Smart Solution for Investment Property Financing
If you’re a real estate investor looking to purchase or refinance income-generating properties, a DSCR loan may be the ideal product for your portfolio. At Coastal Funding, we specialize in helping investors leverage these flexible, efficient loans designed specifically for rental assets.
What Is a DSCR Loan?
A Debt Service Coverage Ratio (DSCR) loan is a mortgage product for investment properties—where loan approval is based on the property’s actual or expected rental income rather than the investor’s personal income or tax returns. The DSCR ratio measures a property's ability to cover its debt payments from its own cash flow. Most lenders look for a DSCR above 1.0 (positive cash flow), though many prefer a buffer of 1.1–1.2 or higher.
With DSCR loans, you can:
- Qualify without showing W-2s, tax returns, or employment verification.
- Borrow as an individual, company, or LLC.
- Use the cash flow from the property to qualify—no personal income documentation required.
How Does a DSCR Loan Work for Investors?
- Eligibility Based on Property Cash Flow: Your property’s rental income is compared against the annual debt obligations. The formula is simple: DSCR = Net Operating Income ÷ Debt Payments. If your DSCR is above the lender’s threshold (typically 1.0–1.2), you can qualify.
- Types of Properties: Short-term and long-term rentals, apartment buildings, multi-units, and even cash-out refinancing on existing investment properties.
- No Limit on Number of Properties: Many lenders do not cap how many DSCR loans or financed properties you can hold—helping you grow your portfolio efficiently.
Benefits to Real Estate Investors
- Faster and Easier Qualification: Skip the documentation headaches. Approval depends on the property’s projected or actual rent rolls, not your personal financial profile.
- Access More Capital: If you already own several rental properties, DSCR loans help scale up your holdings—without traditional mortgage restrictions.
- Refinance or Cash-Out: Use a DSCR loan to refinance existing investment properties or pull out equity for new investments.
- Flexibility: Suitable for investors with complex or variable incomes who want a straightforward lending process.
- Borrow Through LLCs: Protect your personal assets by structuring ownership and financing through your business entity.
Basic DSCR Loan Requirements
- Minimum DSCR (typically 1.1–1.2)
- Down payment: Usually 20–30%
- Minimum credit score: Often 700 or higher (varies by lender)
- Properties must be income-generating and generally in good repair—fix-and-flip projects may not qualify.
- Some lenders require a minimum loan amount (e.g., $175,000).
Is a DSCR Loan Right for You?
DSCR loans are designed for:
- Investors with multiple or growing rental portfolios.
- Applicants looking for alternatives to conventional income verification.
- Those who want to purchase, refinance, or cash-out rental/investment property using rental income as the basis for qualification.
Ready to expand your investment portfolio?
Contact Coastal Funding for a consultation on DSCR loan options customized for your investment goals. Our experts will guide you through every step, from qualifying to closing, for properties throughout Alabama, Florida, South Carolina, and Tennessee.