A DSCR Mortgage Loan Might Be A Good Way To Start Investing In Real Estate

If you're just starting in real estate investing, you may be looking for the best way to finance your first property. A good option to consider is a DSCR mortgage loan. This type of loan considers the income produced by your property against the property's expenses to qualify you for the loan. It may be easier for you to obtain a DSCR mortgage loan than a traditional mortgage. Here's a quick look at how this type of mortgage loan works.

The Loan Is Based On Net Operating Income

You'll need to determine the net operating income of the property and provide the supporting documents to the lender. The net income is the amount of rent produced minus expenses such as taxes, maintenance, and insurance. The net income always has to be more than the monthly mortgage payment. The bigger the gap between the net income and mortgage payment, the easier it should be to keep up with payments.

DSCR mortgage loan lenders set their own minimum net operating income when deciding if you can qualify for a mortgage. Other sources of income are not considered for this type of mortgage loan. This is the main difference between a DSCR mortgage and a traditional mortgage. 

If you apply for a traditional mortgage for an investment property, you can't include the income you're likely to earn on the property. Instead, you have to supply your income from other sources to qualify for the loan. A DSCR mortgage allows you to qualify based on the future earning potential of the property alone.

The Loan Is Beneficial For Complicated Income

If you're self-employed or have money from investments or other sources besides a job, reporting your income can be complicated. You can avoid dealing with that issue completely when you get a DSCR mortgage loan. You don't have to submit any income or assets to qualify. This can simplify the loan application process and speed it up a little too.

You'll Still Need Good Credit

Even though your personal income isn't considered when you apply for a DSCR mortgage, your credit score is important. You may even need a higher score than you might need for a traditional mortgage loan. Just like when you apply for any type of mortgage, it's best to get your financial details in order first so your credit score is as high as possible because your loan might be declined if your report shows a history of financial problems or poor money management.

You Might Carry More Than One Mortgage

A traditional lender might not approve more than one investment mortgage at a time, but you could potentially have multiple no-income verification investments or DSCR mortgages at once since each one is qualified on the potential income from the investment property. This could allow you to build your investment portfolio quicker and take advantage of real estate price trends.

Speak to a company like NewFi Lending to find out more.