DSCR Loans in Tennessee

Griffin Funding is proud to offer DSCR loans for investors across the state of Tennessee, including the following areas:

At Griffin Funding, we’re proud to offer DSCR loans all across the state of Tennessee.

What Are DSCR Loans?

DSCR stands for debt service coverage ratio, which is a term that’s used to describe the amount of cash flow you have versus the debt you have to pay. In the case of DSCR loans for Tennessee rental properties, this refers to your rental income compared to the annual debt for that rental property.

These loans are considered non-QM loans, which means they have more flexible underwriting terms than conventional loans. Most traditional Tennessee home loans require you to submit extensive documentation, including proof of income, employment history verification, and more. With Tennessee debt service coverage ratio loans, you don’t have to submit that information because lenders don’t use it to qualify you for a loan.

What Types of Borrowers Should Consider Tennessee DSCR Loans?

While some non-QM loans are a great solution for homebuyers who can’t seem to secure a conventional mortgage loan, that’s not quite what DSCR loans are for. DSCR loans in Tennessee are exclusively designed for property investors who need capital to purchase rental properties and build their investment portfolio. In fact, you can’t use DSCR loans to invest in owner-occupied properties, so you can’t live in the home you purchase with your DSCR loan. However, there are other types of non-QM loans you can use to purchase a home you can live in, such as bank statement loans and asset-based loans.

If you already own an investment property, and would like to leverage your accrued equity to help buy additional investment property, Griffin Funding also offers a Tennessee DSCR HELOAN that mixes the flexibility of a DSCR loan with the perks of a home equity loan.

Tennessee DSCR Loan Benefits

You might want to apply for DSCR loans in TN because you’re not eligible for other types of loans. Or, perhaps you’re just looking to learn more about the benefits of a DSCR loan vs conventional loan. Regardless, there are also many benefits of opting for DSCR loans when it comes to real estate investing:

• Competitive rates based on your DSCR
• Qualify without traditional income
• Down payment requirements as low as 20%
• Fast turnaround from application to funding
• Both short-term and long-term rental properties are allowed
• Interest-only structures and cash-out refinance options are available
• Credit scores as low as 620 are considered
• Loan amounts available for up to $20,000,000

What Are the Eligibility Requirements for a DSCR Loan in Tennessee?

DSCR loans in TN tend to have more flexible lending criteria than other types of loans, but there are still some basic criteria that you’ll need to meet before getting approved. These criteria are the same statewide, whether you’re looking for DSCR loans in Nashville or Leiper’s Fork:

• DSCR: For conventional DSCR loans, your DSCR should be at least 1.25. However, Griffin Funding considers applicants with a DSCR lower than 1.0 if the borrower under certain conditions.
• Down payment: Plan to have at least 20% available as a down payment. If you have recent credit events or other credit challenges, this requirement may be higher.
• Credit score: A minimum credit score of 620 is required. However, a higher score is always encouraged for the best chances at a competitive approval and low down payment. Download the Griffin Gold app to track your credit and get tips on boosting your score before applying.
• Investment property: An appraisal will be performed on the prospective investment property to assess its market value and determine its expected rental income.

How Is DSCR Calculated?

Before you’re approved for a loan, your lender will need to make sure your DSCR is high enough that you can be relied on to make loan payments on time. Your DSCR represents the ratio between your rental income and the annual debt for a rental property. The formula for DSCR is:

Debt service coverage ratio (DSCR) = Rental income ÷ annual debt

Here’s how we calculate your DSCR at Griffin Funding:

1. To start, we figure out your rental rate by looking at lease agreements and getting an appraisal from a licensed appraiser. We pick the lower of the two numbers to use as your rental rate. You can also show us 12 months of rental income history instead of having an appraisal done.
2. Next, we look at your bills as a property owner. We combine your payments on the principal, interest, taxes, insurance, and any HOA fees you may owe. This is your total annual debt.
3. The final step is dividing your rental income by your total annual debt to calculate your DSCR.

For example, let’s say we estimate your rental income to be $50,000 and your annual debt to be $40,000. When you divide 50,000 by 40,000, you get 1.25. This is your DSCR, and it means your rental income is higher than your debts, so you should be able to make loan payments on time.

If you’d like to take the napkin math out of the equation, and learn more about how it all works, try our online DSCR calculator to get a rough idea of where your DSCR will be.

What DSCR Do Lenders Look for?

When you apply for a loan, different lenders will require varying DSCRs. 1.25 is generally considered to be a good DSCR, and most lenders will consider this to be the minimum qualifying DSCR.

Fortunately, Griffin Funding offers flexible qualifying requirements for DSCR loans in Tennessee. We can even fund loans for borrowers with a DSCR below 1.0 in some cases. This gives you a lot more flexibility and allows us to offer loans to more investors.

Even if your DSCR isn’t high enough to be eligible for a DSCR loan, there are other non-QM loans you may be able to apply for, such as:

• Asset-based loans: Asset-based loans are secured based on available assets instead of income, which includes things like accounts receivable and inventory.
• Bank statement loans: With a bank statement loan, several months of bank statements are used to prove your income and qualify for a loan.
• Interest-only loans: Interest-only loans allow you to pay strictly toward interest for a set number of years—determined by your lender. After that, your payments change and begin counting toward the principal.

Start the DSCR Loan Process Today

If you want to expand into investing in more properties, the first step is securing funding. With a DSCR loan in Tennessee, you invest in a property without providing proof of income and jumping through unnecessary hoops. Plus, with Griffin Funding, you gain access to competitive interest rates and knowledgeable loan specialists who can help you find the best solution for your circumstances. To learn more about debt service coverage ratio in TN or apply for a loan, complete our online application or call Griffin Funding at (855) 394-8288.