Why underwriters use the debt service coverage ratio?
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ellerey
Apprentice
Joined: 08 Feb 2006
Posts: 9
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 Posted: 06/19/08 - 06:28 Post subject: |
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| There are a couple of underwritings that I know, but I my primary interest is in real estate underwriting and why is in this process debt service coverage ration used for? I am not asking if it is used or not, I am saying that I know that this is used and I just don’t understand why you need to use this at all? |
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kingsly
Apprentice
Joined: 01 Oct 2006
Posts: 4
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| Posted: 07/18/08 - 23:40 Post subject: |
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| This is only used in real estate underwritings and the reason why they use this is very simple. This is the best way to find out if the property that is in stake is capable to redeem its own value. If this is not the case then the final answer is not good at all and you better hope that the property is ready to redeem its own value, like it is suppose to be. This is why they use this ration and it is very obvious why this is not used in other underwriting types. This is at least how I was explained, but I think that this is a good hob after all. |
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