Reference
The glossary.
Every term that shows up on a DSCR loan file, in plain words. No jargon defined with more jargon.
A
- After-repair value (ARV)
- What a property should be worth once a planned renovation is finished. Fix and flip and bridge loans are often sized against it rather than the current value. Fix and flip loans.
- Appraisal
- An independent opinion of a property's value, prepared by a licensed appraiser. On a DSCR loan it usually comes with a rent schedule.
B
- Bridge loan
- Short-term financing used to close quickly or hold a property until it is ready for permanent financing. Bridge loans.
C
- Cash-out refinance
- A new, larger loan that pays off the existing one and returns the difference to you in cash. Cash-out refinance.
D
- Debt service
- The loan payment itself. In a DSCR calculation it is the denominator, measured as the full monthly PITIA.
- DSCR
- Debt service coverage ratio. Monthly rent divided by the full monthly payment. A ratio of 1.00 means the rent exactly covers the payment. What is a DSCR loan.
- Draw
- A release of renovation money on a rehab loan, paid after a phase of work is finished and verified.
E
- Entity borrower
- A borrower that is a company, usually an LLC, rather than an individual. Common on investment property loans. Loans for LLCs.
G
- Guaranty
- A promise by an individual to repay a loan made to an entity. Most entity borrowers sign a personal guaranty.
H
- HELOC
- A home equity line of credit. A revolving line secured by a property, usually sitting behind an existing first mortgage. DSCR HELOC.
I
- Interest-only
- A payment structure where you pay only interest for a set period. It lowers the payment and raises the coverage ratio while it lasts.
L
- Loan-to-value (LTV)
- The loan amount as a percentage of the property's value. Lower LTV generally means better pricing.
M
- Market rent
- What a property should rent for based on comparable leased properties, as estimated by the appraiser's rent schedule.
P
- PITIA
- Principal, interest, taxes, insurance, and association dues. The full monthly payment, and the bottom of the DSCR fraction. PITIA explained.
- Prepayment penalty
- A fee charged if you pay the loan off early, usually within the first few years. Often steps down over time. Closing costs and penalties.
R
- Rate and term refinance
- A refinance that replaces an existing loan without taking cash out, usually to change the rate or the length. Rate and term refinance.
- Rent schedule
- An appraiser's form, often the 1007, that estimates market rent using recently leased comparable properties. How appraisers set rent.
- Reserves
- Liquid funds you hold after closing, usually counted in months of PITIA. They stay yours. Reserves explained.
S
- Seasoning
- How long you have owned a property or held a loan. Some programs require a minimum period before using a new appraised value.
- Short-term rental
- A property rented by the night or the week rather than on a long lease. Financed on booking history or a rental analysis. Short-term rental loans.
V
- Vesting
- How title is held, for example in your personal name or in the name of an LLC.
Still not sure what a term means?
Ask a loan advisor. We would rather explain it twice than have you sign something you do not follow.