What Is a New York DSCR Loan?

First, we should note that DSCR stands for debt service coverage ratio. A New York DSCR loan is a type of loan that allows borrowers to qualify based on the cash flow of their investment property rather than their personal income. 

The debt service coverage ratio is the ratio of a property’s net income and the annual debt associated with that property—which may include interest, taxes, insurance, and HOA fees. Note that your personal income will not be a factor in qualifying for a loan, only the real estate’s net operating income.

A DSCR business purpose loan in New York differs from a conventional loan in a few ways:

  • It is a no-income loan.
  • Approval is based on the property’s DSCR.
  • It generally takes much less time to get approval.
  • The loan can be in the name of the LLC or other business entity

What Are the Benefits of a New York Commercial DSCR Loan?

Some of the benefits of getting a DSCR loan in NY include:

  • Generally faster closing times.
  • Proof of income isn’t necessary to close a loan.
  • No limit on the number of properties that can be invested in.
  • Large loan amounts up to $5,000,000 (minimum loan amount: $100,000)
  • Interest-only options available.
  • No reserves required for cashout loans, and only 6 months required on a DSCR above 1.
  • Down payments of as little as 20%.
  • Can be used for both short-term rental properties and long-term rental properties.
  • Ability to open a loan as a separate entity.
  • Less paperwork than a standard loan.

With flexible requirements like a smaller down payment and no proof of income required, there are fewer barriers to getting approved for a DSCR business purpose loan in New York.

What Is a Good DSCR?

When banks are lending for investment properties, they typically look for properties with a positive DSCR, with a good DSCR typically being 1.25 or higher. However, Griffin funding will allow for a DSCR as low as 0 to qualify for a DSCR BPL in New York, depending on the amount of cash reserves available and down payment amount. The higher the ratio, the fewer cash reserves are necessary.

The loan must also be used only for investment real estate in New York, such as:

  • 1-4 unit investment properties used for business purposes
  • Multifamily up to 10 units

If you’re unsure of what type of loan you need or need clarification on what types of real estate qualify for a commercial DSCR loan, reach out today to speak with one of our knowledgeable loan specialists.

How Is DSCR Calculated for a Commercial Loan?

DSCR can be calculated by dividing a property’s gross income by the annual debt. Your DSCR is the most important qualification metric when applying for a debt service coverage ratio loan in New York. The DSCR formula is:  Annual rental income ÷ Annual mortgage payments = DSCR, aka debt service coverage ratio.

Here are the basic steps you need to take to calculate your DSCR:

  1. Determine the total gross income generated by your investment property. 
  2. Once you have the total gross income/rent, divide this figure by the annual debt to get your DSCR. As we mentioned, annual debt includes principal, interest, taxes, insurance, and HOA fees (when applicable). Expenses such as management, maintenance, utilities, repairs and vacancy rate are not included in the DSCR calculation for commercial DSCR loans.

A DSCR over 1 covers the mortgage, and a DSCR under 1 does not. In general, a bank will want a DSCR of over 1 to make sure that loan payments can be made consistently. However, as we mentioned before, Griffin Funding accepts DSCRs as low as .75. With that said, keep in mind that the better the DSCR, the better loan terms you’re likely to qualify for.

But what if your DSCR is lower than .75? There are a few things you can do to improve your DSCR so that you can hopefully be approved for a commercial DSCR loan. First and foremost, you may want to try to increase your rental income—this is typically the easiest aspect of the property’s financial situation to change. If that’s not possible, or it still doesn’t generate enough to qualify for a DSCR loan in New York, you can also try to lower your mortgage payment through refinancing or renegotiating the terms of the loan with your lender. 

Calculate your DSCR and review other financial metrics with the Griffin Gold app. Compare your loan options and get started with the application process from your mobile device.

Begin the application online or request a free quote today!

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Apply for a DSCR Loan in NY Now

If you live in the Empire State and are looking to expand your investment portfolio with New York DSCR loans, Griffin Funding can help you get the funding you need. We strive to offer competitive interest rates and accept lower DSCR ratios to help as many borrowers as possible qualify and get into real estate investing.

We strive to provide five-star, white-glove customer service, focusing on transparency, loans tailored to your needs, and a streamlined lending process to help make securing a loan as painless as possible. Get started today by filling out an application online. Or, if you still have further questions about commercial DSCR loans in NY, you can reach us at (855) 394-8288.

Frequently Asked Questions: New York DSCR Loans

How do I apply for a DSCR loan in New York?

Applying for a DSCR loan in New York is similar to applying for any other investment property loan. Here are the general steps to guide you through the application process: 

  1. Pre-approval: Some lenders offer a pre-approval process where they assess your financial situation and provide an estimate of the loan amount you may qualify for. This can give you a clear understanding of your budget and help streamline the property search. 
  2. Application: Once you’ve identified a property, submit a formal loan application. The application will require detailed information about the property, your financial situation, and your experience in managing similar real estate investments
  3. Property appraisal: The lender will work with an appraiser to determine the property’s current market value. The appraisal is essential for assessing the property’s income potential and its alignment with the loan amount. 
  4. Underwriting: The underwriting process involves a detailed analysis of your financial documents, the property’s financials, and other relevant factors. The goal is to evaluate the risk associated with the loan and ensure the property’s income can cover the debt service. 
  5. Approval: Upon successful underwriting, the lender will make a decision on loan approval. This includes specifying the terms of the loan, such as interest rates, repayment schedule, and any additional conditions. 
  6. Funding: Once you’ve accepted the terms, the final step is the disbursement of funds.

What is the minimum credit score needed to qualify for a DSCR loan in NY?

The minimum credit score needed to qualify for a DSCR loan in New York can vary among lenders. Griffin Funding accepts credit scores as low as 620 for these loans. While credit score requirements are considered, lenders often weigh other factors, such as the property’s income potential and the borrower’s overall financial health, when making lending decisions. 

Can first-time investors get a DSCR BPL in New York? 

Griffin Funding works with first-time investors in New York seeking DSCR business purpose loans. While some lenders may prefer borrowers with experience in managing income-generating properties, Griffin Funding recognizes the potential of first-time investors and provides financing solutions to support their real estate ventures. 

This inclusive approach allows individuals entering the real estate investment market for the first time to access the benefits of DSCR loans in New York through our expertise and tailored lending solutions.