The Requirement for Current Debt Obligations

Rule

To qualify for a DSCR loan, all personal guarantors must be 100% current on all existing financial obligations. This includes, but is not limited to, installment debts (such as auto loans or student loans) and revolving debts (such as credit cards and personal lines of credit). Any account showing a past-due status at the time of application or closing must be brought current to proceed.

Lendency Insight

One of the biggest "myths" in DSCR lending is that your personal debt doesn't matter. While it’s true that we don't calculate a Debt-to-Income (DTI) ratio—meaning your $1,200/month car payment won't disqualify you—we use your payment history as a proxy for "Credit Character."

If a borrower is struggling to stay current on a $50 credit card bill or a $400 installment loan, it signals to an underwriter that the larger mortgage payment may also be at risk. We aren't looking at how much you owe; we are looking at your habit of repayment. Keeping your external accounts "clean" and current is the simplest way to keep your DSCR loan on track for a smooth closing.

Common Scenarios & FAQs

  • Does this mean my DTI matters for DSCR? No. We do not count your personal monthly debt against the property's income. You can have high monthly outflows, provided every single one of those payments is made on time.

  • What if I have a "Disputed" account that shows past due? Accounts in active dispute can be tricky. Generally, the account must still be brought current, or you must provide documentation from the creditor proving the delinquency is an error.

  • Are student loans included in this rule? Yes. Even if your student loans are in a "deferment" or "forbearance" status, they are considered current. However, if they are in "default" or "delinquent" status, they must be resolved before we can fund your loan.

  • Do I have to pay off my credit cards to close? Not necessarily. You are allowed to carry balances on revolving debt as long as you are making the required minimum payments on time.

Key Definitions

  • Installment Debt: A loan for a fixed amount with a predetermined end date and fixed monthly payments (e.g., auto loans, mortgages, student loans).

  • Revolving Debt: An open-ended line of credit that can be used repeatedly up to a certain limit (e.g., credit cards, HELOCs).

  • Credit Character: A lender’s assessment of a borrower's reputation and track record for repaying debts, separate from their actual income or assets.

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