Who Is a DSCR Loan Best Suited for?

DSCR loans are non-QM loans that are designed for residential property investors. If you want to invest in several rental properties at once, you need a way to fund your purchases. With strict borrower requirements and high rates, these loans can be difficult to qualify for. Securing that funding is even harder when you don’t have the proof of income and employment history that traditional mortgage lenders look for. Real estate investors who use rental properties as a source of income can use DSCR loans to invest in properties based on the rental income of the property, rather than their personal income.

What Is a Hawaii DSCR Loan & How Does It Work?

What Is a Hawaii DSCR Loan & How Does It Work?

To understand DSCR loans, you need to first have a working knowledge of what a debt service coverage ratio (DSCR) is. DSCR is a term used to describe the measurement of cash flow that can pay for annual debt versus the annual debt that needs to be paid. In the case of rental property investing, DSCR is your annual rental income versus the annual debt attributed to that property. If your annual rental income is higher than your annual debt, that means you can pay for your loan by simply renting out said property.

DSCR loans in Hawaii are an alternative to traditional Hawaii home loans. Normally, you’d have to go through a complex application process that includes an extensive list of documentation including proof of income, employment history, your cash reserves, your debt-to-income ratio, and your credit score. DSCR lenders look at one primary metric to determine whether or not you can reliably repay DSCR loans in HI.

How Do You Calculate DSCR?

Before you apply for Hawaii DSCR loans, you need to understand how DSCR is actually calculated by lenders. Luckily, there’s a fairly simple formula lenders use for calculating DSCR for a rental property loan:

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

To help you see how this formula translates into an actual calculation, we’ve broken down the steps of how we go about calculating your DSCR for a loan at Griffin Funding:

  1. We start by figuring out your rental income, which we find using your lease agreement as well as an appraisal by a professional. We use the lower of the two numbers for your rental income. You can also provide 12 months of rental income history instead of using the appraiser’s rental schedule.
  2. Next, we look at your principal, interest, taxes, insurance, and HOA payments (if applicable) to figure out your annual debt.
  3. Once we know your annual debt and your annual rental income, we divide your rental income by your debt to get your DSCR.

The higher your DSCR is, the better. A higher DSCR indicates that your rental income exceeds your annual debt, so you can make all your loan payments on time with money left over. This is what DSCR lenders look for to make sure you can make on-time payments when you apply for Hawaii debt service coverage ratio loans.

If your DSCR isn’t high enough to secure a loan, there are other non-QM loans you might consider. Some of the non-QM loans offered by Griffin Funding include asset-based loans, recent credit event loans, and bank statement loans.

DSCR Loan Benefits

DSCR Loan Benefits

DSCR loans in Hawaii are a smart way to get started with rental property investing. These loans give investors like you access to the funding it takes to invest in rental properties without having to go through the traditional mortgage process. Here are some of the primary benefits to debt service coverage ratio loans in HI:

  • Potentially faster closing times
  • No income or employment history required
  • Interest-only loans available
  • Suitable for new and experienced real estate investors
  • Works with long-term and short-term rental properties
  • Loans for up to $5,000,000
  • Unlimited cashout
  • No reserves required on cashout, 6 months required on loans with DSCR of 1 or more
  • Down payments as low as 20% for some loans

Perhaps the most notable benefit of DSCR loans in Hawaii is the fact that it opens the door for many borrowers who otherwise wouldn’t be able to grow their investment portfolio with traditional loans. If you can’t secure a traditional mortgage loan to invest in rental properties, speak with one of our loan specialists about the possibility of qualifying for one of our Hawaii DSCR loans.

Begin the application online or request a free quote today!

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Hawaii DSCR Loan Requirements

With a DSCR loan, your debt service coverage ratio is the main factor lenders are going to look at. For the most part, the rules and processes surrounding DSCR loans are the same no matter where you’re investing, Hawaii or otherwise. The main factors that change are the average property value and the average rental rate from state to state.

As far as your DSCR goes, many lenders will require you to have a DSCR of at least 1.25. However, Griffin Funding is a bit more lenient when it comes to DSCR loans. As long as you have a DSCR of 0.75, you should be able to secure a Hawaii debt service coverage ratio loan with Griffin Funding. To find out more about the DSCR we require for borrowers and the application process, call us at (855) 394-8288.

A minimum down payment and credit score are required.

Where We Lend

Whether you plan to purchase an investment property on the mainland or one of the Hawaii islands, Griffin Funding can assist you. We serve the following areas:

Areas we Serve
  • Hawaii
  • Lanai
  • Molokai
  • Honolulu
  • Maui
  • Oahu
  • Niihau
  • Kahoolawe

Start the DSCR Loan Process Today

Growing your real estate investment portfolio is a process, but we strive to make applying for DSCR loans in Hawaii as simple as possible. With a Griffin Funding DSCR loan, you can secure funding to invest in rental properties without the hassles of submitting pay stubs, W-2s, and employment verification. Plus, you can get approved with a DSCR of just 0.75, and certain borrowers are eligible for down payments as low as 20%. 

To learn more about DSCR loans in Hawaii or apply for a loan today, call Griffin Funding at (855) 394-8288. To expedite the process, you can also apply for a loan online.