Debt Service Coverage Ratio Loans

Obtain a home loan without relying on tax returns through the DSCR loan program.

If you’re a real estate investor, you can bypass the high rates, points, lengthy approval processes, and stringent lending requirements associated with private loans. The DSCR loan, a form of no-income loan, allows you to qualify based on your property’s cash flow instead of your personal income.

What is a DSCR loan?

A DSCR loan is a Non-QM loan designed specifically for real estate investors. Lenders utilize the debt service coverage ratio (DSCR) to assess the borrower’s repayment capacity without the need for income verification.

Considered one of the Non-QM loan options, the DSCR loan offers an alternative financing route that doesn’t rely on traditional income verification methods. It is particularly advantageous for demonstrating rental income that may not be reflected on tax returns due to legitimate business expenses.

With a DSCR loan, real estate investors can secure financing based on the cash flow generated by their investment properties, rather than relying on pay stubs or W-2 forms, which are not typically available to most investors. The DSCR is used by lenders to evaluate the borrower’s ability to meet monthly loan payments.

Since deductions from properties can lower taxable income, it can be challenging for investors to provide proof of their actual income. The DSCR serves as a measure for lenders to assess loan repayment capacity, enabling investors to meet the eligibility criteria for real estate loans, even if they have significant write-offs and business deductions.

By not requiring pay stubs or tax returns to demonstrate minimum income levels, DSCR loans serve as an excellent alternative for investors with various write-offs and business deductions.

How does a DSCR loan work?

Conventional loans may pose challenges for real estate investors who write off expenses on their properties. However, the debt service coverage ratio (DSCR) loan provides a viable solution by offering easier qualification without the need for traditional income verification through tax returns or pay stubs. This is especially beneficial for investors who either lack these documents or whose true income is not accurately represented due to write-offs and business deductions.

For real estate investors seeking valuable home buying tips, the DSCR loan should be seriously considered, particularly for properties intended for rental or generating income. Whether it’s long-term rentals or operating a short-term rental business like Airbnb, the versatility of the DSCR loan makes it an attractive choice, especially when traditional W-2 income is not available.

The DSCR loan can be utilized for various property types, including:

  • Single Family Residences (SFR), such as single-family homes, condos, and townhomes.
  • Multifamily properties consisting of 1-4 units.

Many real estate investors opt for DSCR loans to invest in rental income properties, enabling them to unlock new revenue streams. If you’re contemplating the purchase or construction of a property and are uncertain about the suitability of a DSCR loan, don’t hesitate to contact Griffin Funding. Our team can assist you in determining whether a DSCR loan aligns with your specific needs and goals.

Benefits of DSCR Loans for real estate investors include:

  • Potentially quicker closing times
  • No income or job history verification required
  • No limit on the number of properties
  • Loan amounts up to $5,000,000
  • Unlimited cash out
  • As little as 20% on down payments
  • Credit scores as low as 620
  • Cashout Refinance up to 75% LTV
  • DSCRs as low as .75%
  • Interest-only loan option available
  • Suited for new and seasoned real estate investors
  • Both long-term and short-term rentals are eligible (Airbnb, VRBO, etc.)
  • No reserves required on cash-out loans, 6 months required on all other loans unless the DSCR ratio is less than 1
  • DSCR LLC loans: Close in the name of your LLC