In the Analysis on Tapering QE3 post Tuesday I included a chart of the US 10 year Treasury rates and you could see them going vertical in the days since the Fed announcement and Bernanke’s press conference last week. We’re in the middle of negotiations on an apartment acquisition with a client and so what interest rates do over the next few days and weeks is extremely important to us. So here’s the updated chart:
Loan-To-Value Ratio (LTV) = Total loan balances (1st mtg + 2nd mtg) / Fair market value (as determined by appraisal). For Multifamily mortgages, LTVs seldom exceed 80%.
Debt Service Coverage Ratio (DSCR, aka DCR, DSR) = Net Operating Income / Debt Service. Most lenders insist that this ratio exceed 1.2 with a few a allowing 1.15.
Personal Debt Coverage Ratio (PDCR) = Monthly Personal Debt / Monthly Personal Income. The Personal Debt Ratio compares the amount of bills that the borrower must pay each month to the amount of income they earn. Personal Debt Ratios seldom are allowed to exceed 50% in practice.