What Is a DSCR Loan?

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’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 mortgages, rentals, and flips, DSCR loans are often one of the best ways for an investor to get a loan that isn’t based on their income or their DTI, although it will still consider their credit score and down payment.

For fix and flips, in particular, these loans can often be used to finance the entire project, from purchase to repairs to sale. This type of financing is also available for cash-out refinances on investment properties, short-term rentals (Airbnbs), and long-term rentals.

For those who are self-employed or have income that isn’t W-2-based, a DSCR loan may be the only way 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. So, what are DSCR loans? They’re a great alternative type of loan that helps you secure financing based on your potential income, a lot like a business loan.

How Is DSCR Calculated?

DSCR is calculated by dividing a property’s’s gross rental income by its debt service. 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. Debt service is the amount of money that a company must spend each year to make its loan payments, including principal, interest, taxes, insurance, and HOA (if applicable)

For rentals, DSCR is calculated by dividing the property’s gross rental income by its total mortgage payments. For flips, DSCR is calculated by dividing the expected gross rental income by the total amount of money that will be owed on the loan, including principal, interest, taxes, insurance, and HOA (if applicable). While the calculations are static, the numbers used may differ slightly. Griffin Funding requires that you hold the flip for at least 1 year. If you are looking to flip a home in 3 months Griffin Funding is not the lender for you.

What Is a Good DSCR Ratio?

A good DSCR ratio for rentals is 1.25 or higher. This means that the property’s gross rental income is 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.

This isn’t just important for mortgage lending–it’s a good rule of thumb for investors who want to make sure they can repay their investment.

What Do DSCR Lenders Look for?

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.

The DSCR lender will also consider the borrower’s credit score and history, as well as the property’s value and location.

For rentals, the lender 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.

Who Is a DSCR Loan Best Suited for?

A DSCR loan is best suited for those who are looking to finance a rental property (long-term or short-term), or a cash-out refinance on an investment property.

For self-employed borrowers or those with income that isn’t W-2 based, a debt service loan may be the only way to get a mortgage.

Documents needed will include :

  • Property information such as an address, purchase price, estimated value, etc.
  • Rental history for those who are looking to finance a rental property. This may include leases, rental agreements, and income statements.
  • Flip information for those who are looking to finance a fix and flip. This may include the purchase contract, estimated repair costs, and expected sale price.

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.

How Does an Oregon DSCR Loan Work?

DSCR loans in Oregon work the same as they do elsewhere. The borrower will need to have a good credit score as well as a realistic plan for renting the property.

For those who are looking to finance a rental property, 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.

Note that most DSCR loans will require at least 20% down. This is normally important for cash flow, too.

Areas We Serve

We can assist you in acquiring a loan, wherever you want to invest. We’re pleased to provide Oregon homebuyers with competitive borrowing rates and great loan programs, regardless of where they reside. Here are our current locations.

  • Portland
  • Eugene
  • Bend
  • Gresham
  • Medford
  • Corvallis
  • Salem
  • Hillsboro
  • Bandon
  • Beaverton
  • Springfield
  • Williamette Valley

Begin the application online or request a free quote today!


Apply Now

What Are the Requirements for a DSCR Loan in Oregon?

The requirements for a DSCR loan in Oregon are the same as they are elsewhere. Borrowers must have a good credit score and a realistic plan for renting the property.

For those who are looking to finance a rental property, 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.

And, there will usually need to be at least 20% down to make the loan feasible. The riskier the loan, the more you will need to be put down.

Apply for a DSCR Loan in Oregon

A DSCR loan is best suited for those who are looking to finance a rental property, or cash-out refinance on an investment property. Borrowers should have a good credit score and at least a 20% down payment. This loan may be the only way for self-employed borrowers or those with income that isn’t W2-oriented to get an investment loan.

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 or a seasoned real estate investor, we can help. Griffin Funding is the best option for DSCR mortgage lending in Oregon. Complete an application today for your next rental property.