What Is a South Carolina DSCR Loan?
If you’re trying to acquire one or multiple rental properties, commercial DSCR loans may be your answer. Or, if you’re self-employed and don’t have a W2 and pay stubs that help prove income, Non-QM loans like the South Carolina DSCR mortgage—also known as a debt service coverage ratio loan—can be a great alternative.
What are Non-QM loans? These loans are designed to assist borrowers who can’t meet the criteria for a traditional mortgage. DSCR loans in particular can be a great option for real estate investors who want to secure a loan based on cash flow generated from an investment property.
How Does a DSCR Loan in South Carolina Work?
The DSCR is a number used to figure your annual rental income compared to the annual debt obligations of the property you want to invest in. If you make enough or more than enough in rental income to pay for your mortgage, a lender will know it is safe to loan you money. The DSCR determines the risk of a mortgage loan without needing W2s, tax returns, or pay stubs. Keep in mind, though, that a minimum credit score is required in order to qualify.
How to Calculate DSCR
To calculate the DSCR, the net operating income is divided by the total debt service (including the principal and interest payments on a loan). Here is a better breakdown of how lenders calculate DSCR to determine the eligibility of DSCR loan borrowers in South Carolina:
1. The lender determines your gross rental income by taking the lease agreement and having an appraiser use a Single-Family Comparable Rent Schedule (Form 1007) to estimate the rental rate. The lower of the two numbers are chosen. Borrowers may also use 12 months of rental income history to qualify instead of using an appraiser. The borrower determines what they want to use to qualify.
2. Next, the annual debt is calculated. This is the amount you pay each year for a rental property. The annual debt for a rental property includes principal, taxes, interest, insurance, and, in some cases, HOA fees.
3. Finally, the annual rental income is divided by the annual debt. This provides the DSCR number. If the two numbers are the same, the DSCR is 1. If the income is twice as much as the annual debt, the DSCR is 2, and so on.
Benefits of DSCR Loan in South Carolina
There are quite a few benefits of getting a DSCR loan in South Carolina. Not only are they flexible, but they are useful when you want to invest in several properties. Although DSCR loans are not the best option for everyone, if you have had trouble getting approved for a traditional loan, South Carolina DSCR loans offer multiple advantages:
- The time for closing may be quicker
- There is no verification of job or income history
- DSCR loans work for new and experienced investors
- There is no reserve requirement for cash-out loans, and 6 months reserves are required on other loans (unless the DSCR ratio is below 1)
- Loans of up to $5,000,000 can be obtained
- The number of properties is unlimited
- Short-Term (Airbnb) and Long-Term Rentals
What are the Requirements for a DSCR Loan in South Carolina?
Loans and their requirements differ from state to state, but the requirements for DSCR mortgage loans in South Carolina are the same as in any other state for the most part. The biggest difference is in the property values, which could change rental rates in that area.
Your DSCR ratio is the main requirement for obtaining the loan. While you don’t have to worry about prior tax returns, W2s, or pay stubs, you must meet the minimum credit score.
What Is an Ideal DSCR?
To qualify for a DSCR loan, lenders require that you meet a certain threshold. At Griffin Funding, we offer DSCR loans to borrowers with a DSCR higher than 0.75. It is important to note that 12 months of verifiable reserves are needed if your DSCR is below 1, so you should have cash or other liquid assets you can quickly access.
Remember that even if you do not qualify for a DSCR loan in South Carolina, Griffin Funding has other loan options available. Bank statement loans can work well for borrowers who may not be able to qualify for a mortgage using tax returns and pay stubs, but can demonstrate a proven history of deposits through their bank statements.
What Is the Minimum Down Payment for a DSCR Mortgage Loan in South Carolina?
Just like a traditional mortgage, a down payment is required to obtain a DSCR loan. A down payment reduces the lender’s risk by providing a large sum of money that allows you to purchase the property. The lowest down payment accepted for a DSCR loan obtained through Griffin Funding is 20%.
Suppose you aren’t investing in multiple rental properties but cannot secure a traditional mortgage. In that case, we offer Non-QM loans, including asset-based loans, jumbo loans, and recent credit event loans that have flexible requirements and may be easier to obtain.
Areas We Serve
Griffin Funding can help individuals all over South Carolina, including the following cities:
- North Charleston
- Rock Hill
- Hilton Head Island
- And more
- Mount Pleasant
- Goose Creek
How to Apply for a DSCR Loan in South Carolina
Don’t be discouraged if you have challenges with getting approved for a traditional loan. You can apply for a DSCR mortgage loan in South Carolina by filling out an application on the Griffin Funding website. An associate will review your application and contact you to move forward with the process.
Apply for a DSCR Mortgage Loan in South Carolina
When you’re ready to start your home search in South Carolina, turn to Griffin Funding for South Carolina DSCR loans. We offer competitive rates and terms for DSCR mortgage loans in South Carolina, so you can invest with confidence. Use our website to apply now for a DSCR loan in South Carolina and start expanding your real estate investment portfolio.