Debt Service Ratio Loans

Debt Service Ratio Loans (DSR Loans) are a type of mortgage where the borrower’s ability to repay the loan is assessed based on their debt service ratio, which is the proportion of their monthly income that goes toward paying debt obligations. Lenders use the DSR to evaluate a borrower’s financial stability by comparing monthly debt payments, including the new mortgage, to their gross income. The ratio helps lenders determine whether the borrower can afford to take on additional debt without overextending their finances. A lower DSR indicates a lower level of financial risk for the lender. These loans are typically offered to borrowers with strong incomes relative to their debt commitments, and they may be used for various types of properties, including primary residences, investment properties, and second homes. The DSR is a critical factor in determining loan approval and the terms of the mortgage.