More than one path to financing
Depending on the borrower and property, an investor may consider conventional investment-property financing, DSCR programs, certain Non-QM options, cash-out financing, or other specialty products offered by participating lenders.
Cash flow and qualification are different questions
A property can look attractive as an investment but still fail a particular loan program's qualifying rules. Conversely, a loan can qualify while producing a payment that weakens the investor's intended return. Both sides should be reviewed.
DSCR programs
Debt Service Coverage Ratio programs may evaluate an investment property's qualifying rental income relative to the required housing expense rather than qualifying primarily from the borrower's personal income. Guidelines, ratios, reserves, prepayment terms, and property requirements vary by lender.
What I compare
- Down payment and leverage
- Projected or qualifying rental income
- Reserves
- Rate, points, and prepayment provisions where applicable
- Conventional versus DSCR or other Non-QM structures
- Cash-out strategy when equity is involved