DSCR Loans in California

Areas We Serve

Griffin Funding offers mortgage loans across the state of California. We serve the following areas and more:

What Is a California DSCR Loan?

A California DSCR loan is a real estate investment loan that qualifies borrowers based on a property’s rental income, not personal income. Using a property’s debt service coverage ratio (DSCR), lenders evaluate the income-generating potential of the property and make a lending decision based on that rather than a borrower’s tax returns or pay stubs.

Rental property loans in California can be difficult to secure loans for, especially if you don’t have W-2s and pay stubs that you can use to prove your income. For real estate investors who want to qualify based on rental income, non-QM loans like California DSCR loans are an excellent alternative. Non-QM loans are designed for borrowers who can’t meet the criteria to secure a traditional mortgage for one reason or another.

Advantages of California DSCR Loans

Here are some of the benefits of DSCR loans in CA:

• Fast closing based on rental projections
• No W‑2s or tax returns required
• You don’t have to verify your job or income history
• Ideal for self‑employed or investors with mixed income
• DSCR loans work for both new and experienced investors
• These loans can be used for long-term and short-term rentals
• No reserves for cashout loans, 6 months reserves required on other loans (unless DSCR ratio is below 1)
• Loan amounts up to $20,000,000
• Unlimited number of properties
• Tailored for California’s dynamic rental market

Unsure whether a California debt service coverage ratio loan is the right fit for your needs? Our loan specialists can help—call us at (855) 394-8288.

How Is DSCR Calculated?

Here’s a step-by-step explanation of how lenders calculate DSCR to determine who’s eligible for DSCR loans in California:

1. Determine gross rental income: Firstly, a lender will determine your gross rental income by looking at your lease agreement and having an appraiser use a Single-Family Comparable Rent Schedule (Form 1007) to estimate your rental rate, then choosing the lower of the two numbers. You can also use 12 months of rental income history to qualify instead of using an appraiser. It depends on how much documentation you want the responsibility of providing.
2. Calculate debt obligations: The next step is finding your annual debt, which is the amount you must pay each year for a rental property. For loan qualification purposes, the annual debt includes principal, interest, taxes, insurance, and HOA fees (if applicable). This is the number you have to pay annually to maintain the rental property.
3. Divide rental income by debt obligations: The last step is dividing your annual rental income by your annual debt to find your DSCR. If the two numbers are the same, you have a DSCR of 1, if your income is twice as much as your annual debt, you have a DSCR of 2, and so on.

Your debt service coverage ratio basically describes how much rental income you’re bringing in versus your debt obligations for a property. Consider using our DSCR calculator to help you determine if you qualify for the loan.

What Is a Good DSCR Ratio?

Generally, a DSCR ratio of 1 means you have enough rental income to repay your loan. A good DSCR ratio above 1 indicates a stronger ability for repayment and that the property is generating income.

At Griffin Funding, we offer DSCR loans to borrowers with a DSCR below 1. However, it’s important to keep in mind that 12 months of reserves are required for loans with a DSCR below 1, so you’ll need cash or other liquid assets that you can quickly access. In some cases, Griffin Funding will lend on no ratio DSCR loans with a larger down payment.

Even if you don’t qualify for a debt service coverage ratio loan in California, Griffin Funding offers other types of loans you may be interested in. Bank statement loans and asset-based loans are both good alternatives for investors or self-employed borrowers who want to secure home financing without using traditional income verification methods.

DSCR Loan Requirements in California

The key requirements for a DSCR loan in California include:

• Minimum down payment of 20% (15% considered on a case by case basis)
• Minimum credit score of 620
• Minimum loan amount of $100,000
• Property must undergo an appraisal
• Must be used to finance an income-generating investment property

Your DSCR ratio is the main requirement when it comes to securing a DSCR loan. You don’t have to worry about providing prior tax returns, pay stubs, or W-2s as long as you meet the minimum DSCR requirements for a loan in California. In addition to creating opportunities for investors, this also makes DSCR loans a simpler option for many borrowers.

What Down Payment is Required for a DSCR loan?

The lowest down payment accepted for a DSCR loan through Griffin Funding is 15%. As with typical mortgages, you’ll have to make a down payment for a DSCR loan. Down payments reduce the risk that the lender is taking by providing a large sum of money to allow you to buy property.

If you’re not planning on investing in multiple rental properties but you can’t secure a traditional mortgage, our other non-QM loans like our asset-based loans, jumbo loans, and recent credit event loans are other alternatives with flexible requirements.

Apply for a California DSCR Loan Today

Real estate investments are a great way to build wealth in California, but securing a loan for expensive California homes can be tough. With a DSCR loan from Griffin Funding, you can get investment property financing in California without having to worry about W-2s, pay stubs, and tax returns.

If a DSCR loan doesn’t align with your needs at the moment, make sure to check out our other California mortgage programs to find a loan that works for you.

Download the Griffin Gold app for personalized tools to help you achieve your real estate goals. You can call Griffin Funding at (855) 394-8288 to learn more about California DSCR loans, or get started online today.