What Is a North Carolina DSCR Loan?
A North Carolina DSCR loan allows borrowers to qualify for loans based on the amount of potential cash flow from a property rather than their personal income. DSCR loans are Non-QM loans, or non-qualified mortgages, and they aren’t bound by the documentation requirements of the Consumer Financial Protection Bureau (CFPB).
You may use a NC DSCR loan for your commercial or residential real estate purchase if you’re an investor who needs a loan based on non-traditional income verification. Rather than using a tax return or a W2, a lender will make calculations for the loan based on the property’s income potential.
How Does a NC DSCR Loan Work?
One of the barriers real estate investors face in acquiring new property is the income stated on their tax returns. Investors often write off expenses for their properties, making them ineligible for a conventional loan. However, the application process for DSCR business loans doesn’t require proof of income from pay stubs or tax returns.
Using a DSCR loan in North Carolina is one way to purchase property without having to demonstrate the significant amount of personal income that a conventional loan would likely require. Essentially, a DSCR loan uses cash flow rather than income to help you qualify for a commercial or residential real estate loan.
Can Anyone Get a DSCR Loan North Carolina?
A DSCR loan uses a non-traditional method to determine whether a buyer qualifies for the loan, but potential borrowers must still meet other qualifications. In most cases, borrowers must reach a 1.25 DSCR to qualify to take out a loan. However, Griffin Funding can provide financing to applicants who have a DSCR that’s as low as 0.75.
How does the DSCR calculation work? It’s a number calculated by taking your gross rental income and dividing that number by the total mortgage payment (the principal plus interest, taxes and insurance). You’ll sometimes hear the mortgage payment referred to as “debt service.”
Do NC DSCR Loans Require a Down Payment?
To qualify for a DSCR loan, you must have 20 percent of the total loan value for a down payment. Some lenders require a higher down payment amount of 25 percent, but the general range is 20 to 25 percent. You’ll also pay lender and service fees, which may range from zero percent to three percent of the total loan amount.
Benefits of North Carolina DSCR Loans
The main benefit of applying for a DSCR loan in North Carolina is that it allows you to secure an investment property without already having the income to support the mortgage payment. In addition, DSCR loans also come with other benefits like quick closing times for some loans, significant loan limits up to $5 million, and no limit to the number of properties.
Other benefits include unlimited cash-out potential and interest-only payment options. Whether you select a long-term or short-term rental, you can qualify for a North Carolina DSCR loan program. An example of a short-term rental is one hosted on a website like VRBO or Airbnb.
Qualification Requirements for DSCR Loans in North Carolina
The most crucial part of qualifying for Non-QM loans like DSCR loans is reaching the coverage ratio, which must be at least 0.75 when working with Griffin Funding (Exceptions do apply in some cases). Once you’ve met that threshold, the next determining factor is the loan-to-value (LTV) ratio, which is an expression of the total mortgage amount compared to the full appraised value of the property. Lenders traditionally require an LTV of 80 percent.
The lender will look at your credit score, too, and the minimum score is usually 640, which is similar to a traditional investment property loan. You may find it helpful to complete an application for your DSCR loan after increasing your credit score as much as possible.
Areas We Serve
Are you searching for an investment property in North Carolina? Griffin Funding serves the entire state, including the following locations:
- High Point
- And more
- Chapel Hill
Are you wondering whether a property you want to purchase will qualify for a North Carolina DSCR loan? Contact us for more information on our service locations.
How to Apply for a DSCR Loan in North Carolina
The first step in applying for a DSCR loan is figuring out your DSCR ratio. You’ll take the property’s gross rental income and payments on the mortgage debt (that includes the principal, interest, taxes and insurance – HOA if applicable) and determine your ratio.
For example, a property with a gross rental income of $100,000 and a total debt service of $80,000 would have a DSCR of 1.25.
Once you’re confident that you have the credit score and DSCR ratio to qualify for a loan, you’ll complete an application through the Griffin Funding website.
Other Non-QM Loans From Griffin Funding
You’ll want to explore the other loan options available from Griffin Funding if you decide that a North Carolina DSCR loan isn’t what you need. We also offer additional Non-QM loans that include the following.
- Asset-based loans
- Foreign national loans
- Jumbo loans with 10% down
- Bank statement loans
- Interest-only loans
- Recent credit event loans
Find out if You Qualify for a North Carolina DSCR Loan
If you’re intrigued by the possibilities and benefits of a DSCR loan, we encourage you to find out if you qualify for a North Carolina DSCR loan from Griffin Funding. You may contact us online or call us at (855) 394-8288. One of our experienced and helpful loan specialists can walk you through the process and give you all the details you need to know to make an informed decision.