DSCR Loan Requirements

Last updated: July 10, 2024

Borrowing Entity

LLC Documents

• Articles of Organization
• Operating Agreement
• Certificate of Good Standing
• IRS EIN Letter or W-9

Corporation Documents

• Articles of Incorporation
• Bylaws
• Certificate of Good Standing
• IRS EIN Letter or W-9

Personal Guarantor

DSCR loans for 1-4 unit properties must be personally guaranteed. We require one or more members representing 51%+ of the borrowing entity to serve as a personal guarantor. Here are some scenarios to make sure we are on the same page about who needs to serve as a guarantor:

• Single Member LLC:: the 100% member must serve as a guarantor
• 2 Member LLC, 50/50 ownership: both members must serve as guarantors, the lowest credit score is used for underwriting and loan terms
• 2 Member LLC, 51/49 ownership: only the 51% member needs to serve as a guarantor, this avoids the 49% member from needing their credit to be pulled and is ideal if the 49% member has lower credit
• 3 Member LLC: any combination of 2 members as long as their ownership adds up to 51% or more
• 4 Member LLC, 25/25/25/25 ownership: any combination of 3 members, the lowest credit score is used for underwriting and loan terms

Mortgage Experience

While DSCR loan guidelines vary depending on the institutional investor that purchases the DSCR loan from the originating DSCR lender, it is generally required that among the members of the borrowing entity there is a guarantor that has at least one (1) mortgage with at least 24 months of history and no late payments within the past 24 months. This "trade line" requirement is usually verified via trimerge credit report, however, it is fairly common for the borrower to have a business purpose mortgage (i.e. another DSCR loan) that does not report to personal credit. In this scenario, a verification of mortgage signed by the business purpose lender or servicer can serve as evidence of mortgage experience. The mortgage experience does not need to be active, it can be a mortgage that has since been paid off. The reason for this requirement is that institutional DSCR loan investors want the borrower to have demonstrated experience making on-time mortgage payments. If there is no verifiable mortgage experience, it is up to the DSCR lender's loan committee and their institutional investor to allow an exception. Successful exceptions to this requirement often require "compensating factors" such as high credit score, high liquidity, real estate investing experience, LTV that is 5-10% below maximum (i.e. 70% instead of 75% on a cash out refinance).

Credit Score

The institutional investors that purchase DSCR loans have implemented strict credit score requirements. There is no standard guideline for credit score, however, there are general expectations that can be set.

The credit score utilized to price the LTV and interest rate of your DSCR loan will be the lowest middle score among the guarantors in your borrowing entity. The middle score is the determined based on trimerge credit report. At OfferMarket, we are committed to protecting your credit score which is why our trimerge credit reports are always soft inquiries ("soft pull"), not hard inquiries ("hard pull").

If you have a 2 member borrowing entity where each member owns 50%, then...

As Is Value

Seasoning

Liquidity Verification