DSCR Loans in Colorado

Areas We Serve

At Griffin Funding, we’re proud to serve cities across the state of Colorado. Whether you’re looking to get a DSCR loan in Boulder, Vail, or anywhere else, we’re here to help. Below are just some of the areas we serve:

What Are Colorado DSCR Loans?

Colorado debt service coverage ratio loans, also known as DSCR loans, differ from traditional loans because you aren’t required to submit pay stubs, W-2s, and tax returns as a means of verifying income in order to qualify for a loan. DSCR loans are non-QM loans, which means they’re designed for people who can’t qualify for a conventional mortgage or those who don’t want to deal with the high rates of private hard money loans. Keep in mind that DSCR loans work more or less the same in every state, but property values and rental rates differ depending on the region.

Unlike conventional Colorado home loans, DSCR loans are designed to serve real estate investors. Lenders will look at the DSCR of a prospective borrower to determine whether or not that individual is eligible for a loan. As long as you’re making enough rental income to pay your monthly mortgage, you can typically qualify for Colorado debt service coverage ratio loans. This is the key metric because it helps lenders reduce the risk they’re taking by lending you money to invest in real estate.

How Is DSCR Calculated?

Before you can qualify for a DSCR loan, lenders will have to calculate your DSCR. Different lenders require their own minimum debt service coverage ratios, so understanding how DSCR is calculated is important. Here’s a breakdown that shows you how Griffin Funding calculates DSCR to determine who is eligible for a loan:

1. We start by looking at your gross rental income, which we determine based on your lease agreement as well as an appraiser filling out Form 1007. We’ll use the lower of the two numbers as your gross rental income. Alternatively, you can provide us with 12 months of rental income history—that way you don’t have to use the appraiser’s rental schedule to qualify.
2. Once we know your gross rental income, we’ll figure out your annual debt. When looking at annual debt for a DSCR loan, we look at the principal, interest, taxes, insurance, and HOA payments (if applicable). We combine all of these annual numbers to figure out how much you need to make in order to make loan payments, insurance payments, and HOA payments (if applicable) on time.
3. Lastly, we’ll take your annual gross rental income and divide it by your annual debt to figure out your DSCR. If the numbers are equal to one another, that means you have a DSCR of 1.

If that’s still confusing, we’ll take a look at an actual example of how lenders use income and debt to calculate DSCR. Let’s say you have a gross rental income of $60,000, but your annual debt is only $40,000. All you have to do is divide $60,000 by $40,000, which leaves you with a DSCR of 1.5.

What DSCR Do Lenders Look for?

Typically, any DSCR above 1 is considered good, but there are other loans you can get if your DSCR is too low. Bank statement loans and asset-based loans are both good alternatives for certain borrowers who can’t apply for debt service coverage ratio loans in CO.

At Griffin Funding, we offer flexible qualifying requirements and can even provide loans to borrowers with a DSCR of less than 1 in certain cases. However, you get access to lower interest rates and overall better loan terms if you have a DSCR above 1.25.

What Are the Benefits of a DSCR Loan?

If you want to invest in rental properties without using W-2s and pay stubs, DSCR loans may be a good alternative. 

DSCR loans in Colorado provide several benefits for investors, including:

• DSCR loans may close quicker
• You don’t have to verify your income or job history
• There’s no limit to the number of properties you can invest in
• Loans up to $20,000,000 are available
• Down payments start at just 20%
• DSCR loans are great for new and seasoned investors
• DSCR loans can be used for both short-term rentals and long-term rental properties

Want to learn more about whether a DSCR loan in CO is the right fit for your needs? Speak with one of our loan specialists today.

What Are the Requirements for a DSCR Loan in Colorado?

To qualify for a DSCR loan in Colorado, borrowers need to meet specific criteria. Here are the primary requirements you must meet:

• Debt service coverage ratio: A good DSCR is a key factor in determining eligibility. It compares your rental income to the debt payments on the property. A ratio of 1 or higher means your income from the property can cover the loan payments, which makes you a safer candidate for the loan. However, we can also fund loans for those with a DSCR of less than 1 under certain circumstances.
• Minimum 20% down payment: Like with most mortgages, a down payment is required to secure a DSCR loan. Down payments start at 20% for qualified borrowers but may be higher depending on the loan amount and the borrower’s financial profile. Note that a higher down payment can help strengthen your application and potentially allow you to secure a better rate and terms.
• Minimum credit score of 620: Lenders require a certain credit score to ensure you’re a reliable borrower. You’ll generally need a minimum credit score of 620 to qualify for a DSCR mortgage loan in Colorado, but a higher credit score can lead to a better rate.
• No owner-occupied properties allowed: DSCR loans are intended for investment properties, so the property you’re purchasing or refinancing must be used as an income-generating rental property. You cannot live in the property yourself under this loan program.

What Is the Down Payment Requirement for a DSCR loan?

Although DSCR loans are a popular alternative to traditional mortgages, you’re still required to make a down payment to secure a DSCR loan. At Griffin Funding, we offer DSCR loans with down payments as low as 20%. However, it’s important to keep in mind that a larger down payment will reduce your monthly loan payments, so you might want to consider putting more money down.

Apply for a Colorado DSCR Loan Today

If you want to invest in rental properties but you don’t have the capital to do it, DSCR loans in Colorado are an excellent option. At Griffin Funding, we offer DSCR loans with as little as 20% down. Not only that, but we also offer several other non-QM loans if our Colorado DSCR loans aren’t right for you. To learn more about our DSCR loans, give us a call at (855) 394-8288, or apply for a DSCR loan with Griffin Funding by filling out our online application.