What Is a DSCR Loan?
Debt service coverage ratio (DSCR) loans in Nevada help borrowers purchase or refinance rental properties without having to show W-2 forms, tax returns, or other income-verification documentation usually required for conventional mortgage loans. Instead, eligibility is based on the property’s cash flow, specifically using the debt service coverage ratio.
With a DSCR loan, investing in property becomes much more accessible for more borrowers. Find out if you can qualify for a Nevada DSCR loan with Griffin Funding today.
What Is a DSCR Loan?
Nevada DSCR loans designed for real estate investors looking to make new purchases on rental properties. Investors can prove their ability to pay back a loan by demonstrating the income made from a property rather than from their salary or employment documentation. Instead, the debt service coverage ratio (DSCR) is used.
The debt service coverage ratio is the amount of cash available to cover the mortgage payment. Lenders use the DSCR to assess what loan amount can be paid back from the income on a new property.
Some of the key benefits of debt service coverage ratio loans are that borrowers can often avoid long approval processes and qualify for the loan based on a property’s cash flow rather than income listed on their tax documents.
What Can a DSCR Loan Be Used for?
DSCR loans are generally used to finance residential real estate investments. A DSCR loan in Nevada can be used for both short-term and long-term rentals.
Advantages of DSCR Loans
Not only can NV DSCR loans help real estate investors close on their new property faster, but they can also help investors save money and avoid lengthy bidding wars. DSCR loans often require a lower down payment and there is no limit on the number of properties you can own. Applicants don’t have to worry about providing job history verification and borrowers can access NV DSCR loans up to $5,000,000. There is also an unlimited cash-out option for DSCR borrowers in NV.
How Do Lenders Calculate DSCR for a Loan?
It’s critical for real estate investors interested in securing a DSCR loan to consider how their DSCR is calculated since it will be used to analyze whether they can successfully make enough cash to cover their loan payments.
DSCR is calculated based on the amount of available cash to cover debts. The DSCR required by lenders may depend on a variety of factors, and in a good economy borrowers have a better chance to secure loans with a lower DSCR. To calculate DSCR, gross rental income is divided by total debt obligations for the property..
- DSCR = Gross Rental Income / Total Debt Obligations
Total debt obligations typically include expenses such as the total annual principle, taxes, interest, and HOA fees if applicable. Typically the higher the DSCR is, the easier it is for borrowers to secure financing for their investment property. Griffin Funding does not factor expenses such as management fees, maintenance, utilities and repairs in the DSCR calculation.
What Is the Minimum DSCR Lenders Look for?
There are many lenders who require a DSCR of 1.25 to qualify for a loan, however Griffin Funding allows real estate investors to qualify for DSCR loans in Nevada with a ratio as low as .75. Our goal is to help more investors qualify for the loan they need so they can continue building their real estate portfolio.
It’s also important to note that Griffin Funding does not require reserves for cash-out loans, and only six months of reserves are required on all other loans unless the DSCR ratio is less than 1.
Where Are Nevada DSCR Loans Available?
- Douglas (Stateline, Lake Tahoe, Zephyr Cove)
- Washoe (Reno, Incline Village)
- Carson City
- Clark (Las Vegas, Henderson)
However, this is not an exhaustive list. So, if you’re interested in learning more about DSCR loans in Nevada and how to secure a loan for a new investment property, please reach out to us to speak to one of our loan specialists today.
Our team also offers DSCR loan opportunities to real estate investors in these states: AZ, CA, CO, FL, GA, HI, ID, MD, MI, MT, TN, TX, VA, and WA.
Are There Other Loan Options for Investment Properties?
Griffin Funding specializes in various types of Nevada home loans including:
- Non-QM loans – Non-qualified mortgage loans, or non-QM loans, are aimed at helping new home buyers who don’t have the standard documentation to prove their income such as a W-2 form and tax returns. DSCR loans, bank statement loans, asset-based loans, and interest-only loans are examples of non-QM mortgage options.
- Interest-only loans: Interest-only loans are loans without principal payments, and generally, the monthly servicing requirements are low. The borrower pays only the interest on the loan for some or all of the loan term and the principal balance does not change.
- VA loans: VA home loans are loans backed by the federal government and accessed through private lenders. These loans are only available to active service members and veterans as well as spouses of fallen service members. VA loans offer several distinct benefits, including no down payment.
- Bank statement loans – Similar to DSCR loans, bank statement loans don’t require borrowers to present employer verified information or tax documents in order to secure the loan. Borrowers simply need to show proof of income through regular deposits on their bank statements.
Find Out If You Qualify for a DSCR Loan in Nevada
DSCR loans in Nevada are often the most effective way for real estate investors to get the money they need to lock in a new property. We have interest-only loan options available, and our team is highly experienced in providing new and seasoned real estate investors with loan guidance. To learn more about how to secure the best loan possible or apply for a new loan, you can call us at (855) 651-2871. Or, to get started now, you can submit an application for a DSCR loan in NV online.