DSCR Loans in Oregon

A DSCR loan is a type of business loan that is based on the property’s debt service coverage ratio (DSCR). This ratio is a measure of a borrower’s ability to make loan payments, and it is used by lenders to determine the riskiness of a loan. A high DSCR indicates that the property has plenty of cash flow to make its loan payments, while a low DSCR indicates that the borrower may have difficulty making its payments.

For those looking to invest in rental properties, DSCR loans are often one of the best ways to get a loan that isn’t based on their personal income.

This type of financing is also available for cash-out refinances on investment properties, short-term rentals (Airbnbs), and long-term rentals. For investors who have already accrued significant equity in their property, a DSCR HELOAN is another great option to tap into a property’s equity and make additional investments.

For those who are self-employed or have income that isn’t W-2-based, a DSCR loan may be one of the only ways to get a mortgage. This is because traditional loans require borrowers to have a W-2 income in order to qualify, but with a DSCR loan, the borrower’s ability to repay the loan is based on their cash flow, not their income.

DSCR loans may be a fantastic option for certain borrowers, and there are several benefits of using a DSCR loan in Oregon – especially for those who lack consistent W-2 income. However, there may also be some drawbacks to consider. Here are some important pros and cons to keep in mind while deciding:

Pros:

• No proof of income or W-2 employment verification is required
• Relatively fast closing times, when compared to traditional loans
• Available for both new and seasoned investors looking to grow their real estate portfolio
• Borrow in an LLC
• Cash-out refinance options available
• No limit on the number of properties you can purchase

Cons:

• High down payment requirement when compared with traditional mortgages
• Higher interest rates
• Cannot be used to buy a primary residence or fixer-upper
• Prepayment penalties

Simply put, DSCR is calculated by dividing a property’s’s gross rental income by its debt service.

Debt service is the amount of money that a company or individual must spend each year to make its loan payments, including principal, interest, taxes, insurance, and HOA (if applicable). The lender does not take NOI into account. No other expenses are used to calculate the DSCR ratio other than debt service expenses from its revenues.

Below is the quick way to calculate your DSCR. Or, if you’d prefer, Griffin Funding offers a quick and easy-to-use DSCR calculator tool.

1. Gross rental income: For rentals, DSCR is calculated by dividing the property’s gross rental income by its total mortgage payments.
2. Annual debt: For loan qualification purposes, annual debt is the sum of all annual principal, interest, taxes, HOA (if applicable), and insurance payments.
3. DSCR: Divide your gross rental income (step 1) by the annual debt (step 2). This will be your DSCR.

A good DSCR for rentals is 1.25 or higher. This means that the property’s gross rental income is 25% higher than the mortgage payment. A ratio of 1.0 indicates that the property’s gross rental income is equal to the mortgage payment, and a ratio below 1.0 indicates that the property’s gross rental income is less than the mortgage payment.

While a DSCR that’s higher than 1.25 will help you secure the best terms, you may still be able to qualify with a lower DSCR. At Griffin Funding, we can fund loans for borrowers with a DSCR below 1.0. However, it’s important to note that negative DSCR loans will come with higher down payment requirements and interest rates.

Though the borrower’s DSCR is a major qualifier when applying for a DSCR loan, it isn’t the only metric that Oregon DSCR lenders are looking for. Here are some of the most important factors to keep in mind to have your best chance at approval:

• Debt service coverage ratio (DSCR): When a lender is considering a DSCR loan, they will look at the borrower’s debt service coverage ratio, as well as the property’s gross rent and the mortgage payment.
• Personal credit: The DSCR lender will also consider the borrower’s credit score and history. If you’re looking to learn tips to improve your credit score and begin building an action plan to secure a DSCR loan, download the Griffin Gold app today.
• Property value: In addition to personal credit and DSCR, lenders will consider the property’s value and location. They will look at the rental market in the area to make sure that there is enough demand for rentals to support the property’s gross rents.

A DSCR loan is best suited for those who are looking to finance an income-producing rental property, whether it’s a long-term or short-term rental. This type of financing can help real estate investors grow their portfolio without being subject to the restrictions that accompany conventional mortgage loans.

If you want to get a DSCR mortgage loan in Oregon, some of the documents needed will include:

A DSCR loan can be a great way to finance an investment property, but it’s important to understand how the loan works and what is required in order to qualify. Borrowers should still have both a good credit score and a steady income, as well as a realistic plan for renting the property, even if income isn’t checked.

We can assist you in acquiring a loan, wherever you want to invest. We’re pleased to provide Oregon home buyers with competitive borrowing rates and great loan programs, regardless of where they reside. Whether you want to get a DSCR loan in Portland or Eugene, we’re here to help. Some of the areas we serve include:

Two of the most popular benefits of DSCR loans are the quick and simple application process and the fact that there is no income verification required. However, there are still some important requirements that must be met prior to getting approved:

• Borrowers must have a good credit score and a realistic plan for renting the property. A minimum credit score of 620 is required, though higher is always better. The average borrower has a credit score of around 732.
• While Griffin Funding will consider a DSCR of 0.75 or lower, it is recommended to have a DSCR of at least 1.0 for the best chances at a competitive approval with a reasonable down payment.
• An appraisal will be performed to determine the property’s current market value and expected rental income. The lender will also look at the rental market in the area to make sure that there is enough demand for rentals to support the property’s gross rental income. DSCR loans are only available for investment/rental properties; owner-occupied homes will not be considered.
• DSCR loans are typically approved for amounts between $100,000 to $20,000,000. There will usually need to be at least 20% down to make the loan feasible. The riskier the loan or the lower the DSCR, the more cash you will need to put down.

A DSCR loan in Oregon can help you achieve your real estate investment goals within the state. Oregon DSCR loans provide an alternative pathway to home financing for investors who want access to large sums, but don’t want to qualify using their personal income.

As you account for the things to consider before buying a home or rental property, turn to Griffin Funding. Whether you’re a first-time home buyer looking to secure a DSCR loan in Portland, or a seasoned real estate investor looking to add to your portfolio, we can help. Griffin Funding is the best option for DSCR mortgage lending in Oregon. Complete an application today for your next rental property.