Qualify for a home loan without using your tax returns. As a real estate investor, you can avoid high rates and high points of private loans, lengthy approval processes, and strict lending criteria with a debt service coverage ratio loan, which is a type of no-income loan. Qualify for a loan based on your property’s cash flow, not your income.
Securing a debt service coverage ratio loan can help you expand your investment portfolio easier than ever before.
A DSCR loan is a type of non-QM loan for real estate investors. Lenders use a DSCR to help qualify real estate investors for a loan because it can easily determine the borrower’s ability to repay without verifying income.
Because real estate investors write off expenses on their properties, some may not qualify for a conventional loan. The debt service coverage ratio loan allows these individuals to qualify more easily because they don’t require proof of income via tax returns or pay stubs that investors either don’t have or that don’t represent their true income due to write-offs and business deductions.
The Debt Service Coverage Ratio is a ratio of a property’s annual net operating income and its annual mortgage debt, including principal and interest. Lenders use DSCR to analyze how much of a loan can be supported by the income coming from the property as well as to determine how much income coverage there will be at a specific loan amount.
Many lenders will require a 1.25 DSCR to qualify for a DSCR mortgage loan. However, Griffin Funding allows real estate investors to qualify for a loan with a DSCR as low as .75 so that they can qualify with the cash flow of your property. Please note that interest rates are better on DSCR ratios of 1 or above and that a DSCR ratio of less than 1 requires 12 months of reserves.
When considering what a good DSCR ratio is, lenders need to ensure that a borrower is able to pay back the loan.
The debt service coverage ratio formula is the annual gross rental income divided by the debt obligations of the property.
Please note that Net Operating Income (NOI), Capitalization Rate (Cap Rate), Cash on cash return (COCR), Return on Investment (ROI) are not considered for mortgage loan qualifying purposes.
A real estate investor might be looking at a property with a gross rental income of $50,000 and an annual debt of $40,000. When you divide $50,000 by $40,000, you get a DSCR of 1.25, which means that the property generates 25% more income than what is necessary to repay the loan. This also means that there is a positive cash flow in the lender’s eye.
The DSCR lets the lender know how to determine a borrower’s ability to pay off their DSCR mortgage. Lenders must forecast how much a real estate property can rent for so that they can predict a property’s rental value.
If you have a DSCR of less than 1.0, it means that a property has potential for negative cash flow. DSCR loans can still be made on properties with less than a 1 ratio however they usually are purchase loans with home improvements / upgrades / remodeling to be made to increase the monthly rent or for homes with high equity and potential for higher rents in the future. You also can potentially get the property above a 1.0 ratio with a DSCR interest only loan.
Griffin Funding offers these loans for borrowers with a DSCR as low as .75. If you fall below that requirement, you still have tons of other loan options available to you, including the following Griffin Funding non-QM mortgages:
Begin or continue building your real estate investment portfolio without the need for a private loan. Our DSCR loans are an excellent mortgage option for new and seasoned investors to help you build your portfolio without mortgage challenges standing in your way. Apply for a DSCR loan online today.
Want to learn more about our non-QM loans before applying? Contact us online or call us at (855) 394-8288 to speak to one of our experienced loan specialists.
DSCR No-Income Mortgage Loan Rates
The principal and interest payment on a $320,000 30-year fixed-rate purchase money mortgage at an interest rate of 3.99%, a credit score of 740 plus, and 80% loan-to-value (20% down payment) is $1,525.88/mo. No-Income Non-QM DSCR investor loans do not have mortgage insurance premiums and do include a 3-year pre-payment penalty. The APR is 4.323% with standard third-party closing costs, $995 Underwriting Fee, $625 Processing Fee, 0% origination, and 3% discount points. 30 year fixed rate home loans require repayment over the course of 360 months. Contact a Griffin Funding mortgage professional for eligibility information. Monthly taxes, insurance, and any HOA dues are not included in the monthly payment example above. DSCR loans are only valid for non-owner-occupied investment properties Equal Housing Lender. Income qualification is based on the rental income of the property. NMLS# 112011
Please enter your username or email address. You will receive a link to create a new password via email.