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Foreign National DSCR Investment Property Loans

Foreign national DSCR investment property loans are an excellent program for non-U.S. citizens to purchase or refinance residential, 1-4-unit rental properties without having to provide income tax returns. DSCR stands for Debt Service Coverage Ratio, which means that the primary factor to underwrite the mortgage is the cash flow from the property, along with the borrower’s FICO scores and liquid assets.

A foreign national DSCR mortgage program can be a great way to invest in residential real estate in the United States. Real estate investors with many properties often have significant tax deductions that reduce their Adjusted Gross Income (AGI) to a level that makes qualifying for a loan with their tax returns difficult. By qualifying using the cash flow of the property rather than personal income taxes (like a conforming loan requires), foreign national investors with small to large residential investment portfolios can acquire and invest in more properties.

Below are the main features of foreign national DSCR mortgages in today’s marketplace.

Foreign National DSCR Borrower Requirements

  • 700 FICO score (minimum)
  • 3 tradelines for 12 months OR 2 tradelines for 24 months

DSCR Loan Parameters

  • 75% LTV purchase
  • 70% LTV cash-out refinance
  • $100,000 to $2 million loan amounts
  • 1.25 DSCR (cashflow is at 125% of expenses < $12,500 over $10,000>)
  • 1-4 unit residential properties

Benefits of DSCR Loans

  • Qualify using property income versus personal Adjusted Gross Income (AGI)
  • No limit on properties owned
  • No limit on number of financed properties
  • Loans for single assets or blanket loans with multiple properties
  • 30-year fixed rate loans

Drawbacks of DSCR Loans

  • Interest rates ~1.00% higher than conforming loans (Fannie Mae & Freddie Mac).
  • Prepayment penalties (PPP) are standard (1, 3, 5-year PPP). The lower the interest rate, the longer the prepayment penalty.
  • Foreign national LTV is capped at 70% LTV on cash-out and 75% LTV for purchases. 
    (U.S. citizens are 80% LTV for cash-out and 85% LTV for purchases.)
  • Foreign national borrowers must have FICO scores over 700.

Conclusion

Foreign national DSCR investment property loans are an excellent option to invest in residential, 1-4-unit real estate in the United States. By using the cash flow from the properties rather than the borrower’s AGI, it's easier to build a portfolio of properties that will pay off over the long run, creating a steady stream of future income.

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