No Ratio Mortgage and DSR Housing Loan for Investment Properties
If you are self-employed or looking to expand your rental portfolio, there are loan options that allow properties to close in an LLC or corporation with no personal debt-to-income ratios. The no ratio mortgage and DSR housing loan allows investors to finance as many properties as they want. For better terms, you can use the DSCR ratio calculator to determine property performance.
DSCR Formula Real Estate
The DSCR ratio calculator is a simple three step process.
- Add the subject properties net operating income.
- Gross income is determined by the lesser of the what the property is leased for or the proposed rental income prepared by an appraiser.
- Calculating the total mortgage payment, which consists of monthly:
- Principal and interest.
- Property taxes.
- Homeowner’s insurance.
- If applicable, homeowner’s association dues.
- Dividing the net operating income by the mortgage payment = DSCR ratio calculator.
In most cases you would want a debt-service coverage ratio of at least 1.00 to qualify for the DSR housing loan, but there is a no ratio mortgage option.
No Ratio Mortgage
The main difference between the DSR housing loan and the no ratio mortgage is the terms. They require an additional 5% down over the DSR housing loan and interest rates are not as competitive.
No Ratio Loan Program Information
- 5/1 and 7/1 ARMs available.
- 30 year and 15 year fixed rates.
- You may be a citizen or foreigner.
- Can close in an LLC or corporation.
- 1 to 4 unit and condos are eligible.
- Non-warrantable condos are eligible.
- Cash out up to 70% loan-to-value.
- You can finance as many properties as you want.
No Ratio Loan – Down Payment and Credit Score
The no ratio loan program requires a minimum of 25% down. The down payment varies depending on credit score – minimum is 640 FICO. For better terms, it is important to check the DSCR real estate calculator to determine if a property qualifies.
DSR Housing Loan – DSCR Formula Real Estate
For properties that qualify, these loans can close in an LLC or corporation with no personal income. Just like the no ratio loan, there are no limits on the number of properties you can finance.
DSCR Real Estate Down Payment and Credit Score
If a property cash flows using the DSCR ratio calculator of 1.00, it qualifies for a minimum down payment of 15%, but depends on your credit score. The minimum FICO credit score is 620 versus 640 for the no ratio loan.
No Ratio loan and DSR Housing Loan Cash Out
Maximum loan-to-values depend on the program and how the property performs.
- The no ratio loan allows a maximum loan-to-value of 70%.
- The DSCR housing ratio loans allows a maximum loan-to-value of 85%
If you are looking to do property improvements, they must meet conventional appraisal standards.
Property Condition Must Meet Conventional Appraisal Standards
Deficiencies of the property cannot affect the safety, soundness, or structural integrity of the property. Investment rehab loans are available to investors, which also do not take personal debt-to-income ratios as a qualifying factor.
They are based off a liquidity ratio and terms are based off of:
- Past experience in the past 24 months.
- Credit score.
- Real estate experience though none is needed.
- Net worth.
- Active rental properties.