What Is a DSCR Business Purpose Loan?
Debt service coverage ratio business purpose loans (DSCR BPL) are considered commercial loans even though they are offered on residential 1-4unit properties. DSCR BPLs offer more flexibility for investors whose tax returns don’t paint an accurate picture of their financial situation. With these loans, borrowers can qualify based on the income generated by an investment property, as lenders use the DSCR to determine a borrower’s ability to repay the loan.
This focus on rental property income and performance makes DSCR loans valuable tools for real estate investors and provides faster closing times with a less comprehensive underwriting process.
To calculate your DSCR, divide your rental property income by the mortgage debt. DSCRs 1 or above mean the property generates enough income to cover its debts. DSCRs below 1 mean the real estate investor may not be able to fulfill their debt obligations.
Key Benefits of DSCR Business Loans in Alaska
The biggest benefit of these Non-QM loans is flexibility and being able to qualify using rental property cash flow rather than personal income that might not accurately demonstrate a borrower’s ability to repay the mortgage loan. Key highlights of this loan program include:
- Faster closing times: Because DSCR lenders in Alaska don’t need to verify personal income, the underwriting process may be faster, allowing you to close quicker and start generating income.
- No income or job history verification: Lenders don’t need to know about your personal income or job history because you’ll qualify based on the property’s DSCR.
- Larger loan amounts: DSCR loans are based on a property’s income, allowing borrowers to qualify for loan amounts up to $5,000,000.
- Low down payments: DSCR loan down payments may be lower than traditional investment property loans. At Griffin Funding, you can make a down payment as low as 20%.
- Long and short-term rentals eligible: Whether you invest in an AirBnB or 1-4 unit rental, we offer DSCR loans for long- and short-term rentals, allowing you more flexibility in how you generate revenue.
At Griffin Funding, you can qualify for an Alaska DSCR loan with a DSCR as low as 0.75. However, the lower your DSCR, the higher your interest rate since this number indicates a potential inability to repay the loan.
Alaska DSCR Loan Qualification Requirements
Specific eligibility criteria for DSCR loans in Alaska vary by lender. However, in general, you can expect the following:
- DSCR: Your DSCR is the most important factor lenders use to determine loan eligibility.
- Credit score: Lenders typically like to see a credit score of around 680 for traditional loans. However, DSCR loans allow for credit scores as low as 620.
- Cash flow/rental income: Lenders review the cash flow/rental income of the property to determine DSCR. However, they also want to see that the rental income is steady.
- Down payment: Most DSCR loans require a down payment between 20-30% of the property’s purchase price.
- Minimum Loan Amount: $100,000
Work With a Trusted DSCR Lender in Alaska
With a focus on your investment’s income potential, our DSCR loans offer flexible financing solutions tailored to your needs. Experience a seamless loan process and expert guidance every step of the way to help you seize the best opportunities in the Last Frontier.
Griffin Funding can help you determine if a DSCR loan is right for you and how much you may qualify for. Get a mortgage today by contacting us to learn more about the process.
Frequently Asked Questions: Alaska DSCR Business Loans
Who should apply for a business purpose DSCR loan in Alaska?
DSCR business loans in Alaska are designed for investors only. These commercial loans are ideal for the following types of borrowers:
- Real estate investors
- Small business owners who own investment properties
- Investors with multiple properties
- Foreign investors without tax returns
- Those with a difficult time qualifying for income-based loans
- Self-employed investors
What types of properties can I purchase with a DSCR business loan in Alaska?
Investors can use a DSCR loan in Alaska to finance a variety of property types as long as they can generate enough rental income to cover the loan payments. Properties eligible for Alaska DSCR loans include:
- Residential investment properties, including single- and multi-family homes rented to tenants.
- Short-term and vacation rentals
Griffin Funding only allows these commercial loans on 1-4 unit residential properties. In addition, these properties must be used as investment properties only, meaning you can’t use them to find a primary residence.
What does the DSCR loan application process look like?
The DSCR loan application process is typically more streamlined than conventional business loans. At Griffin Funding, we aim to complete the loan process within 30 days of application completion. The process consists of several steps, such as:
- Discovery: The discovery call is the initial consultation that helps us understand your unique financial needs to determine if a DSCR is the best loan option for you.
- Application: After determining that a DSCR loan in Alaska is the best option, you can submit a loan application by filling out our online application or going through the process with us on the phone.
- Underwriting: During the underwriting process, we review your financials and information about the business or investment property, focusing primarily on the rental income it generates. We’ll also run a credit check to evaluate your creditworthiness.
- Appraisal: The appraisal ensures the property is worth the asking price, preventing you from overpaying for a property while we assess the risk associated with the loan.
- Closing: Once your loan is approved, we can schedule closing to finalize the loan agreement, set up the repayment schedule, and distribute the funds, allowing you to purchase the rental property.