Innovative Mortgage Solutions

Five things to know about DSCR loans:

1. DSCR loans are based on the debt service coverage ratio (DSCR) of the property. DSCR is calculated by dividing the property's net operating income (NOI) by its debt obligations. Lenders typically require a minimum DSCR of 1.0 to 1.3 for a property to qualify for a loan.

2. DSCR loans are typically used to finance residential and commercial real estate properties, such as office buildings, shopping centers, and apartment buildings.

3. DSCR loans typically have longer terms than traditional commercial loans, ranging from 5 to 30 years. This makes them ideal for long-term investments.

4. Unlike traditional commercial loans, DSCR loans do not rely solely on the borrower's creditworthiness to determine eligibility. Instead, the primary focus is on the property's cash flow and ability to generate income.

5. DSCR loans may require a larger down payment than traditional commercial loans. Lenders typically require a down payment of 20% to 25% of the property's value, depending on the lender's requirements and the borrower's creditworthiness.

It's important to note that DSCR loans can have varying terms and conditions depending on the lender, so it's important to do your research and compare rates and terms from multiple lenders before choosing a loan.

Jobless Claims
Even though hiring plans and job postings look softer, employers are clearly trying to hold onto the workers that that currently have. The Claims figures were basically flat from the previous week - Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, fell 2,000 to 190,000 and remains beneath 200,000. Continuing Claims, or those that continue to receive benefits after their initial claim, fell 5,000 to 1.7M, but there has been a upward trend in this figure. While these are volatile numbers, it’s clear that once workers are laid off they are having a harder time finding new work.

FHFA House Price Index
The FHFA (Federal Housing Finance Agency) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Different than Case Shiller, it does not include cash buyers or jumbo loans. The FHFA reported that prices were down 0.7% in December and only 0.1% after seasonal adjustments. Year over year, home prices are still up 6.6%. From the peak, home prices according to FHFA are down 2.7% raw, and only 1% after seasonal adjustments. Based on this, you can interpolate that the decline in Case Shiller is coming from higher priced homes where there is less demand. Additionally, there is likely cash discounts being offered, where buyers paying in cash are able to command a lower price, which is why Case Shiller is also lower.