DSCR loans for Kentucky rental property

What the ratio actually measures

Take the monthly rent, divide it by the monthly carrying cost, and you have a number a lender can compare across files. That is the entire idea. The carrying cost is not just the mortgage payment. It includes the property tax bill, the insurance premium, HOA dues where they exist, and any program-specific allowances the lender adds.

What the ratio leaves out matters just as much. Vacancy, property management, lawn care, turnovers, a water heater in February, and the return you could earn elsewhere are all real costs that the lender’s number ignores. A property that clears a lender floor with nothing left over is a property you are subsidizing. We say that plainly before anyone pays for an appraisal, because a file that only works on paper is not a favor to anybody.

How a Kentucky file gets sized

Kentucky gives an underwriter three local inputs to work with, and each one can move the ratio more than a small change in the note rate. The first is rent. A lender generally uses its own rent figure rather than the lease in your hand: an appraiser’s market rent survey for a Louisville Highlands duplex, or a form rent schedule for a Bowling Green fourplex. If the market rent comes in below what you are collecting, the lender sizes on the lower number.

The second is property tax. Kentucky assesses real property at fair cash value through the local property valuation administrator, and the bill you see as the seller is not necessarily the bill you will see as the owner. A purchase that resets the assessment can lift the monthly escrow. We pull the parcel record and model the tax line before we model anything else.

The third is insurance. Kentucky sits in a hail and wind corridor, the Ohio River towns carry flood exposure in places, and older Louisville and Owensboro housing stock often has a roof, wiring or plumbing profile that insurers price accordingly. A replacement-cost policy with a percentage wind/hail deductible can be the single largest line in the carrying cost on a modest house. Getting a real quote for the address, not a guess, is the difference between a ratio that holds and one that collapses at underwriting.

What we ask for up front

The list is short because the loan is about the property. We want the address, the current or expected rent, whether it is leased, the entity that will hold title if there is one, and a sense of the condition and any planned work. From there we can price the scenario across programs and tell you what the ratio looks like through each lens.

Later, when a file moves, the lender will want the purchase contract or the current mortgage statement, an entity document, insurance evidence, and reserves. Reserves are usually expressed as a number of months of carrying cost held after closing. The amount varies by program, property and borrower profile; we tell you the requirement for the specific program rather than a generic figure.

• Property address, unit mix and current or projected rent
• Purchase contract or existing loan statement
• Entity documents if the property is held in an LLC
• Insurance quote for the address, with the deductible structure
• A short scope of work if the property needs repairs before it rents

Where the program stops

A DSCR loan is for business-purpose, non-owner-occupied investment property. It is not a home loan, and we cannot use it to finance a house you or your family will live in. It is also not a construction loan, a fix-and-flip bridge, or a replacement for a line of credit you use to buy materials. If your plan is to buy a Lexington bungalow, renovate it over four months and sell it, a DSCR loan is the wrong tool and we will say so.

Some investors ask whether an LLC changes the ratio. It does not. It changes the paperwork, the vesting and sometimes the program list. Kentucky allows an LLC to hold real property, and most rental programs are comfortable with a single-purpose entity; the operating agreement and good standing with the Secretary of State are what the lender actually reviews.

How we shop it

We are a broker, which means we do not have one set of guidelines to defend. We take the same scenario to multiple wholesale lenders, compare how each one treats the rent, the reserves, the entity and the property type, and bring back the options that genuinely fit. Sometimes the honest answer is that no program likes the file at this loan amount, and the better move is more equity or a different property.

What we do not do is quote a rate on a website. Pricing depends on the property, the leverage, the borrower and the day. Once we have the address and the numbers, we can show you actual program options side by side and let you decide.