Posted by Ed Garcia on January 23, 2001 at 11:03:28:
Mark,
Of course the bank is going to want to take the payment on your seller carry-back into consideration because you have to pay it. Your (DSCR) as you call it, which you mean as Debt Service Coverage Ratio, is actually referred in the industry as (DCR) Debt Coverage Ratio, and usually is between 1.2 and 1.3, so if your lender is requiring 1.4 they’re higher than most. Also Mark you’re figuring your Debt Coverage Ratio incorrectly, If you add debt service it will lower the ratio not increase it from 1.4 to 1.5, go to the How-To Articles and look up “A Glossary Of Common Terms Used In Loans And Lending” written by Ed Wachsman, to learn and understand financial terminology.
Posted by MDEssen on January 23, 2001 at 09:36:06:
I’m new to Investing but I have done extensive reading on it, however, can someone explain to me if DSCR is the accumulation of all mortgages? (2nd, 3rd etc…) Such as owner financed?
e.g. a 1,000,000 complex. I recieve 80% financing through a Bank. I (somehow) get the owner to take the other 20% as a second mortgage. IF I only have the Bank loan I easily attain a DSCR of 1.4, however, because the remaining purchase price is also financed, by the time I add in that loan amount my DSCR drops to 1.05. Question is does the bank take this second mortgage/payments into consideration when calculating the DSCR? Or, is it used to only structure THEIR loan to me and they could care less about 2nd mortgages (they in short would not add it in when considering DSCR)?