DSCR Loans Illinois

Whether you’re looking to secure a DSCR loan in Chicago or the quaint community of Galena, Griffin Funding provides service all across Illinois. Here are just some of the areas we serve:

A DSCR loan, or debt service coverage ratio loan, is a non-QM loan that helps real estate investors qualify for a loan. Lenders use the borrower’s DSCR to determine if they can repay the loan, without having to verify income. This loan also helps the investor qualify without tax returns, long approvals, high points, and high rates.

Additional benefits of having a DSCR loan include:

The DSCR loan in Illinois requirements are fairly straightforward, but you’ll want to know the criteria prior to applying. Here are some of the most important requirements:

• DSCR:
  Your DSCR ratio is one of the factors that determines eligibility for a DSCR loan in Illinois. Generally, a DSCR of at least 1.0 is a good starting point. However you will likely receive better approval terms with a DSCR of 1.25 or higher. With a DSCR lower than 1.0, Griffin Funding will still consider your application but there will need to be strength elsewhere and your potential approval terms may not be as favorable.
• Down Payment:
  A down payment is always required, with 20% being the lowest available for well-qualified borrowers. However, your requirement may be higher if you have a low DSCR, challenged credit, or if the home’s anticipated rental demand isn’t strong enough.
• Personal credit:
  You should have solid personal credit, with a FICO of at least 620. Though applicants with recovering credit are still considered, keep in mind that any approval offered may not be as favorable when compared to the average applicant with a score of 732. If you’d like to learn more about boosting your credit score, or begin preparing an action plan to secure a DSCR loan in Illinois, download the Griffin Gold app today to get a head start.
• Investment properties only:
  DSCR loans in Illinois are available for the purchase or refinancing of long- and short-term investment properties only. Owner-occupied properties cannot be purchased with this type of loan.

Lenders calculate DSCR by taking the annual gross rental income of the investor and dividing it by the debt obligations of the property (annual gross rental income/annual debt). The DSCR formula is actually pretty straightforward. Here’s a quick breakdown:

Investors may wonder about the capitalization rate (cap rate), net operating income (NOI), return on investment (ROI), and cash on cash return (COCR). These are not included in the qualifying process for a DSCR mortgage loan.

The DSCR is key in these types of loans because it assists investors and analysts in determining the strength of an investor’s finances. While the variables on ratios change, anything at or above 1.25 is generally considered a very good DSCR.

Investors with a ratio below 1.0 may be deemed a risk because this indicates the property’s rental income isn’t covering its debt obligations. However, Griffin Funding looks beyond the numbers, allowing real estate investors with DSCRs below 1.0 to qualify for loans with the cash flow of the property. Just keep in mind that lower ratios have higher interest rates, larger down payment requirements, and usually require 12 months of reserves.

If you’d like to quickly calculate your own DSCR to see where you stand, check out our quick and easy online DSCR calculator.

Additionally, besides standard DSCR loans, Griffin Funding offers a variety of alternative financing options to borrowers. Some of the other non-QM mortgage options we specialize in include:

• DSCR home equity loans
  These home equity loans allow the investor to borrow against the equity they have in an existing income-producing property. The property’s debt service coverage ratio (DSCR) is used instead of tax returns or W-2s.
• Interest-only loans
  These loans are structured so the monthly payments are lower for the first portion of the loan and only apply to interest, not principal.
• Asset-based loans
  These loans allow real estate investors to use assets in lieu of income to qualify. This makes it a lot easier for some as it circumvents the need for tax returns or proof of income.
• Bank statement loans
  These loans let lenders verify their income with bank statements instead of using their tax returns. This is advantageous for those investors who may have items that may make it seem as if they bring in less money than they do. These include tax deductions and write-offs.
• Recent credit event loans
  Recent credit events such as short sales, foreclosures, divorces, and bankruptcy often hinder real estate investors looking for a loan. This type of loan takes those events into account, allowing borrowers to qualify and rebuild their portfolios.
• Private money loans
  Private money loans can serve as an alternative to DSCR loans for investors seeking out financing. While private money loans come with higher rates, they allow real estate investors to quickly access financing and improve cash flow.

DSCR lenders look for individuals who believe they will not qualify for a QM loan based on their income, credit score, or recent credit events. They look at the DSCR to determine whether the borrower meets the qualifications. For borrowers who do not qualify for a DSCR loan, there are other alternatives, such as an asset-based loan or a bank statement loan.

While a borrower’s DSCR is the primary factor lenders look at when considering a DSCR loan, other factors that are considered can include:

• Credit score
• Loan amount requested
• The type of property being purchased
• Previous experience managing or owning investment properties

As an investor, partnering with the right DSCR lender can make a big difference. If you’re interested in getting a DSCR loan in Chicago or anywhere else in Illinois, look no further than Griffin Funding. We specialize in DSCR loans in Chicago, offering competitive rates, fine-tuned expertise, and excellent customer service.

Are you ready to get a DSCR loan in Illinois and achieve your real estate investment goals? Complete an online application to get the process started and speak with one of our loan specialists today!