Finance
What is the 'debt coverage ratio' (DCR) used by Kansas commercial lenders?
AThe ratio of the property value to the loan amount
BThe ratio of a property's NOI to its annual debt service, used by lenders to determine if the property generates sufficient income to cover mortgage payments✓ Correct
CThe ratio of the borrower's income to their total debt
DThe ratio of down payment to purchase price
Explanation
The debt coverage ratio (also called debt service coverage ratio/DSCR) = NOI / Annual Debt Service. Most commercial lenders require a minimum DCR of 1.20-1.25, meaning the property generates 20-25% more income than needed to cover the mortgage.
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