DSCR Loans Washington

What Is a DSCR Loan?

A debt service coverage ratio (DSCR) loan is a type of mortgage that is based on the ability of a property’s rental income to cover the annual debts of that property. Instead of the strict requirements imposed by conventional Washington home loans, DSCR loans give investors a different way to qualify for investment property financing.

DSCR loans are considered non-QM loans, which means they’re loans that don’t require borrowers to meet the same criteria as they would for a conventional mortgage. This process is what makes it difficult for many borrowers to secure the funding needed to invest in property because it requires them to qualify based on tax documentation and proof of income, which many borrowers—especially budding investors—don’t have.

While DSCR loans are much more flexible than conventional mortgages, it’s important to keep in mind that there are limits to what kinds of properties you can invest in with DSCR loans in Washington. Additionally, you must meet certain criteria to qualify for a loan, which we’ll review in more detail in the next section.

DSCR Loan Eligibility Requirements

While Washington debt service coverage ratio loans are considered more flexible than other loans in terms of who qualifies, there are still certain eligibility requirements you need to meet. Of course, the most important eligibility requirement when applying for a DSCR loan is your DSCR ratio.

Applicants with a DSCR above 1.0 will typically qualify for the best rates and terms. However, we can work with borrowers who have a negative DSCR as well. It’s important to note that the better your DSCR is, the better rates and terms you’ll be able to qualify for.

Once you’re approved based on your DSCR, keep in mind that you’ll also need to make a down payment. With Griffin Funding, you can secure a loan with a down payment as low as 20%, but that depends on the terms of your loan. A minimum credit score is also required.

What Properties Are Eligible?

Different types of loans are meant for individual purposes, and DSCR loans in Washington State are specifically designed for property investors. What this means is that you can only use DSCR loans to invest in rental properties, including short-term rentals. This is because your DSCR ratio is based on the assumption that you’re investing in a property to rent it out, using the rental income to pay back your loan.

While DSCR loans can’t be used to purchase owner-occupied properties, there are other types of non-QM loans you can use to purchase a home. For example, recent credit event loans allow you to secure a loan even if your credit score dropped significantly due to a recent event.

What DSCR Do Lenders Look for?

Considering your DSCR ratio is the primary metric lenders use to determine your loan eligibility, you should know what lenders are looking for in terms of DSCR. It’s also important to note that different lenders have their own standards when it comes to DSCR ratios. For the most part, however, DSCR loans in Washington require a ratio of at least 1.00. This metric typically applies in most other states as well.

One of the most notable benefits of applying for debt service coverage loans in WA through Griffin Funding is the fact that we have more flexible standards. With Griffin Funding, you can qualify for Washington DSCR loans with a DSCR ratio that’s lower than 0.75. If your DSCR ratio is higher than that, you may be eligible for lower interest rates and more favorable loan terms.

If you’re considering leveraging your property equity, you might explore a DSCR HELOAN as another flexible option. Additionally, if you don’t qualify for a DSCR loan in Seattle, we offer other non-QM loans, such as asset-based loans, bank statement loans, and more.

Where Are DSCR Loans Available?

Griffin Funding provides DSCR loans to qualifying investors throughout Washington State, including the following areas:

How Do You Calculate DSCR?

The first thing a lender will do when you apply for a DSCR mortgage loan in Washington is calculate your DSCR ratio. The good news is, calculating your DSCR is fairly simple, so you can easily understand the number your lender provides when you apply. Here’s the formula for DSCR:

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

That might sound a bit complicated, but it’s simpler than it seems. Here’s how we determine your DSCR at Griffin Funding:

1. We start by calculating your annual rental income, which means using lease agreements and getting an estimate from an appraiser. We take the lower of these two numbers and use it as your rental rate, or you can skip the appraisal if you can provide 12 months of rental income history.
2. Once we’ve got your rental income, we look at your annual debt. This is the amount you pay toward the principal, interest, taxes, insurance, and HOA payments if applicable.
3. Finally, we divide your rental income by your annual debt, which provides us with your DSCR ratio. If your rental income and annual debt are the same, your DSCR will be 1. A good DSCR is usually around 1.25 to 1.5; however, you can still qualify for a DSCR loan if you have a lower DSCR. At Griffin Funding, we can even fund loans for borrowers with a DSCR of less than 1 under certain circumstances.

To simplify this process further, you can use our DSCR calculator to estimate your ratio before applying, ensuring you’re prepared for the loan application.

DSCR Loan Benefits

DSCR loans aren’t just for people who can’t qualify for other types of loans; there are actually lots of good reasons to consider DSCR loans in WA as an investor and as a way to expand your real estate portfolio. Here are some of the key benefits of DSCR loans:

• You can qualify without proof of income or employment history verification
• Your closing time may be faster
• Interest-only loans are available
• You can invest in an unlimited number of properties
• Loan amounts can be up to $20,000,000
• Griffin Funding offers competitive interest rates and down payments as low as 20%
• Cashout refinance options (use cash to buy more investment properties)
• Fixed-rate loan terms of 40-years or 30-years

Apply for a DSCR Loan in Washington State

Choosing the right type of loan is important if you want to be successful in real estate investing. DSCR loans in Washington are a smart way to invest in property in a growing region without having to rely on proof of income or your employment history to secure a loan. If you want to learn more about debt service coverage loans in WA, call Griffin Funding at (855) 394-8288. You can also use our online application to start the process.

For added convenience, consider downloading the Griffin Gold app, which can help you manage your loan, track your application status, and access tools to improve your financial standing.