What Are DSCR Loans?

Having a foundational knowledge of the debt service coverage ratio (DSCR) is an important part of understanding what Idaho DSCR loans are. Your debt service coverage ratio is your cash flow versus the amount of debt you have to pay off if you take out a loan. With rental property investing, this means your annual rental income versus your annual debt as a property investor.

Idaho debt service coverage ratio loans are non-QM loans, which means you don’t have to go through the typical mortgage application process to apply for a DSCR loan. When you apply for conventional Idaho home loans, you have to get a credit check, disclose your assets, prove your income and employment, and jump through several other figurative hoops. Some non-QM loans are designed for regular homebuyers who can’t qualify for a standard mortgage, but DSCR loans are for property investors only.

How Does DSCR Impact Loan Eligibility?

How Does DSCR Impact Loan Eligibility?

Since you don’t have to provide proof of income or job history when you apply for DSCR loans in ID, your DSCR is the main deciding factor in whether or not you’re eligible for a loan. Essentially, your DSCR tells potential lenders whether or not you have the ability to repay your loan based on your rental income. A minimum down payment and credit score are also required.

Your DSCR is represented by a number; the higher your DSCR is, the better. A DSCR above 1 indicates that your rental income is equal to your annual debt, which means you have enough money to make monthly loan payments on time, but not necessarily a surplus of profits.

Lenders use metrics like your DSCR to determine how risky it is to lend to a particular individual. The last thing a lender wants is to loan money to a borrower who can’t pay it back, so they look at your DSCR to make sure you’ve got enough money to make your loan payments on time. This is also why lenders require a down payment when you’re applying for mortgage loans of almost any kind.

How Do Lenders Calculate DSCR?

Before you apply for a debt service coverage ratio loan in ID, you should understand how your DSCR is calculated. This will help you increase your odds of a successful application and understand the response you get from your lender. Here’s a basic breakdown of how lenders like Griffin Funding calculate your DSCR:

  1. Calculating your DSCR starts with figuring out your rental income. Griffin Funding uses a lease agreement as well as an appraisal provided by a licensed appraiser, with the lower of the two numbers being used as your rental rate. You may also provide 12 months of rental income history instead of getting an appraisal.
  2. Once we know your rental income, we’ll look at your total annual debt. To get this number, we combine payments you make toward the principal, interest, taxes, insurance, and your HOA if the applicable property is part of one.
  3. Lastly, we divide your annual rental income by your annual debt to figure out your DSCR. If your rental income and annual debt are the same, that means you have a DSCR of 1.

Here’s an example of a DSCR calculated based on sample numbers to make it even easier to understand. Let’s say you have an annual rental income of $62,500 with an annual debt of $50,000. When you divide $62,500 by $50,000, you get a DSCR of 1.25. DSCR loans in Idaho are the same as DSCR loans in other states, so the calculations are the same everywhere, just with different rental rates and property values.

What Is a Good DSCR?

What Is a Good DSCR?

For most lenders, you’ll need to have a DSCR of at least 1.25 in order to secure a loan. A 1.25 DSCR means you can afford to pay your monthly loan payments and then some with your rental income. However, it’s important to keep in mind that different lenders have their own requirements in terms of your DSCR, so you may be eligible for one loan but not another.

At Griffin Funding, we require a minimum DSCR of 0.75 in order to be eligible for Idaho DSCR loans. However, we do offer lower interest rates and down payments for borrowers who have a higher DSCR.

If your DSCR is too low for this loan program, you may be eligible for another type of non-QM loan. Griffin Funding also offers asset-based loans, bank statement loans, interest-only loans, and recent credit event loans.

Advantages of Securing an Idaho DSCR Loan

DSCR loans in Idaho offer several advantages over traditional loans. You don’t have to submit proof of income or have your employment history verified with a debt service coverage ratio loan in ID. Plus, with Idaho DSCR loans from Griffin Funding, you can take advantage of competitive interest rates. DSCR loans may also lead to faster closing times than traditional mortgage loans in some cases.

The biggest benefit to DSCR loans is that you may be eligible for one even if you’re not eligible for a conventional loan. This makes it possible for more borrowers to secure a loan and explore the world of real estate investing. As long as you have a decent DSCR, you can get the funding you need to invest in Idaho rental properties.

Where Does Griffin Funding Lend?

Griffin Funding provides DSCR loans throughout Idaho, including:

  • Boise City
  • Meridian
  • Nampa
  • Idaho Falls
  • Caldwell
  • Pocatello
  • Coeur d'Alene
  • Twin Falls
  • Post Falls
  • Lewiston
  • And more!

Begin the application online or request a free quote today!

Apply Now

Apply for a DSCR Loan in Idaho Today 

As lucrative as real estate investing can be, getting a loan to purchase rental properties can be a difficult process. If you’re not eligible for a traditional mortgage loan or want a loan that’s tailored specifically to investors, a DSCR loan might be right for you. Griffin Funding offers DSCR loans with down payments as low as 20%, and applying is easy. To find out more about DSCR loans in Idaho or get started today, call Griffin Funding at (855) 394-8288. You can also complete our online application.