What Is a DSCR Business Loan?

A DSCR business purpose loan is a type of financing where the lender assesses the borrower’s ability to repay by emphasizing the property’s rental income cash flow. DSCR stands for “debt service coverage ratio,” and it’s calculated by dividing the gross rental income by the total debt service, including principal and interest payments.

Unlike traditional loans, where a borrower’s overall financial health, credit score, and personal income are the primary considerations, DSCR business purpose loans in West Virginia focus on the income-producing potential of the property in question. 

These loans have an income-centric approach, with the primary determinant for the loan’s approval being the property’s rental income. Additionally, each property’s DSCR is evaluated independently, allowing an investor with multiple properties to secure financing for one even if another isn’t performing well.

Advantages of DSCR Loans in West Virginia

Like with all mortgage programs, understanding the pros and cons of DSCR loans can help determine if this is the right option. By emphasizing the property’s rental income over a borrower’s personal financial health, DSCR loans in West Virginia offer various benefits to investors, new and seasoned. Here are a few of the major advantages of West Virginia DSCR loans: 

  • Affordable property market: Historically, West Virginia has had a more affordable real estate market compared to many other states. This feature makes it a potentially lucrative area for real estate investors to buy properties with good rental income potential, and DSCR loans can facilitate these investments. 
  • Diversification: Investors can use DSCR loans in West Virginia to diversify their portfolios and hedge against stock market fluctuations and inflation. 
  • Potential for rural investments: West Virginia is home to many rural areas, and DSCR loans can help you purchase properties in these regions. 
  • Opportunities for diverse borrowers: DSCR loans in West Virginia can be especially beneficial for investors who may not have traditional employment or consistent personal income but have rental properties with strong returns. 
  • Potential to finance multiple properties: Since each property is evaluated on its own metrics, an investor can finance multiple properties without their personal financial situation impacting the approval process for each one.
  • Streamlined approval process: Given the focus on rental income, borrowers might find a more streamlined and faster approval process, especially if they have strong rental history potential.

How to Apply for a DSCR Business Loan in West Virginia

Your lender should have a good reputation, favorable loan terms, and experience with the local real estate market, just like Griffin Funding. Follow these steps to apply for a DSCR business loan in West Virginia with Griffin Funding. 

  1. Evaluate the property’s rental income: Gather documentation of the property’s rental history, including lease agreements and bank statements showing rent deposits. If the property is a new purchase, you can compile market research or rental income projections. 
  2. Calculate your DSCR: You can use a DSCR calculator to determine if your property has a high enough DSCR to qualify for Griffin Funding’s program. We accept DSCRs as low as .75, but the higher your ratio, the more favorable your terms. 
  3. Prepare documentation: Prepare documentation needed for the loan application process, such as property tax statements, insurance policies, operating expense records, and property management agreements. 
  4. Complete the loan application: Complete our loan application online or over the phone with one of our mortgage experts. Pay close attention to details to ensure all figures and facts are accurate. 
  5. Appraisal and underwriting: After we receive your application, we may order an appraisal to confirm the property’s condition and value. Then, we’ll review all the documentation you’ve provided to verify the property’s rental income. 
  6. Loan approval: If approved, you can review the loan terms and lock in your interest rate. 
  7. Closing: Once you agree to the loan terms, we’ll schedule a date for closing where you can sign documents and pay upfront fees before we fund the loan. 

Work With a Leading DSCR Lender in West Virginia

DSCR loans are a compelling alternative for real estate investors focusing on property potential. These loans provide flexibility and adaptability to compete in the West Virginian real estate market. 

Griffin Funding is a premier DSCR lender in West Virginia with an in-depth understanding of the West Virginian market. We provide tailored solutions to align with your individual investment goals and property potential while providing a streamlined process to minimize delays and uncertainties. Apply for a DSCR loan in West Virginia today. 

Frequently Asked Questions: West Virginia DSCR Business Loans

What is the minimum down payment for a DSCR loan in West Virginia?

The minimum down payment required for a DSCR loan is 20%. This ensures you start the loan with equity while providing lenders with an added layer of security. 

What is the minimum loan amount for a DSCR loan in West Virginia?

The minimum loan amount required for a Griffin Funding DSCR loan is $100,000.

Is a DSCR loan the same as a hard money loan?

No, DSCR loans are not the same as hard money loans. A DSCR loan focuses on a property’s rental income potential as a basis for lending, while a hard money loan is a short-term loan secured by the property. Hard money loans are typically used for quick real estate transactions. 

Who qualifies for DSCR business purpose loans in West Virginia?

West Virginia DSCR commercial loan requirements vary by lender, but the most significant metric used is the DSCR. Most lenders like to see a DSCR above 1, indicating the rental income surpasses its debt obligations. However, you may qualify with a DSCR as low as .75, or even less than .75 on an exception, at Griffin Funding. 

Both seasoned and new investors can qualify for these loans, provided the property’s rental revenue meets the lender’s requirements.

It’s also important to note that these loans are for investors only. They can be used for residential 1-4 unit investment properties, including DSCR loans for short-term rentals like Airbnb. However, they’re not designed for owner-occupied residences.