Christian OsgoodCEO, Multifamily Strategy · CEO at Multifamily Strategy

General Rules of Bank Financing

18 Aug 2024 · 0 min

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Christian Osgood explains what banks require to finance a property. You need to buy below appraised value for a safety margin, and your cash flow must be at least 1.25 times your mortgage payment, the standard DSCR banks use to protect themselves.

General rules of the game. We've already talked about appraisal. So banks gonna want to see that you're buying it at a good price, less than the property is worth. And they want to see that you have a debt service coverage ratio. It's usually of 1.25. And all that means is after all expenses are paid, you have 1.25 times your mortgage amount coming in in anticipated cash flow on that deal. That is what the debt service coverage ratio is. After all expenses are paid, how much is left to service your debt and pay yourself? 1.25% is where a lot of banks like to see that. It's a pretty safe metric.