A DSCR loan qualifies a rental on whether its rent covers the payment, not on your personal income. For New York investors with several properties, self-employed income or an LLC, that is often the simplest way to finance a rental.
The ratio
DSCR = monthly rent ÷ monthly payment, where the payment includes principal, interest, property taxes, insurance and condo common charges. We prefer 1.0 or higher.
| Rent | Payment | DSCR |
|---|---|---|
| $6,500 | $5,000 | 1.30 |
| $5,000 | $5,000 | 1.00 |
| $4,500 | $5,000 | 0.90 |
What counts in New York
- Every legal unit. In a two- to four-family, each legal unit’s rent counts. The certificate of occupancy should match the units you rent.
- Long-term rent. Local Law 18 bars whole-home rentals under 30 days in the city, so we use leases or market rent.
- In-place rent on regulated units. Stabilized and Good Cause units are underwritten on rent you can actually collect. See our guide to rent stabilization and Good Cause Eviction.
- The real tax bill. New York City Class 1 assessments are capped, so a recent purchase can carry a tax bill well below what its price suggests. Use the actual bill.
Closing costs to plan for
The mortgage recording tax applies to a rental loan just as it does to a flip: about 1.8% to 1.925% of the loan on one- to three-family homes and condos in the city. See our guide to New York closing taxes.
Ways to make the numbers work
- A larger down payment lowers the payment.
- An interest-only period lowers the payment in the early years, and you can qualify on the interest-only payment.
- A 5-year prepayment penalty usually prices lower than a 3-year one.
- Legalizing an extra unit, where zoning and the building code allow, can add rent.
Terms are on the DSCR rental loans page.