What Are Virginia DSCR Loans?
Debt service coverage ratio (DSCR) loans are an advantageous alternative to traditional Virginia home loans. You don’t have to go through the traditional qualification process that you typically need to go through to get a mortgage because these loans have much more flexible underwriting terms.
With traditional home loans, your income, assets, and employment are used to determine if you’re an eligible borrower. With DSCR loans, your eligibility is based on your DSCR, which is the ratio of annual rental income to annual debt. You don’t have to provide proof of income or employment history verification for DSCR loans in Virginia.
DSCR loans are specifically designed for property investors. In fact, you can only use a DSCR loan to purchase rental property because your loan eligibility is based on rental income. If you’re looking for a loan you can use to purchase an owner-occupied home, you’ll need to apply for a different type of loan.
Are DSCR Loans Non-QM Loans?
One of the biggest benefits of DSCR loans is the fact that they’re classified as non-QM loans. Non-QM loans are loans that don’t require the same extensive qualifications as conventional loans do—which means you don’t have to submit proof of income and employment history verification to secure a loan.
In addition to DSCR loans, there are several other types of non-QM loans you can apply for with Griffin Funding. Bank statement loans allow you to qualify for a loan based on information available on your bank statements, while asset-based loans give you a chance to qualify based on assets such as accounts receivable and inventory. And then there are recent credit event loans, which are a unique option for those who have suffered a major hit to their credit and don’t have a chance of qualifying for other types of loans.
How Is DSCR Calculated?
How Is DSCR Calculated?
Your DSCR is the most important number when it comes to Virginia debt service coverage ratio loans. Lenders calculate your DSCR to make sure it meets a certain threshold that’s required to secure a loan. This threshold varies from lender to lender. Here’s how it works:
- First, we have to figure out your rental income. Rental income is determined using lease agreements as well as an appraisal from a licensed appraiser. The lower of the two numbers is used as your rental rate. Alternatively, you may provide 12 months of rental income history instead of getting an appraisal.
- Next, we’ll calculate your annual debt for the property. We do this by combining the payments you make on the principal, interest, taxes, insurance, and any HOA fees you’re responsible for.
- The last step is dividing your annual rental income by your annual debt. The resulting number is your DSCR, which is the number lenders use to approve or deny you for the loan.
If your DSCR ratio is too low to qualify for this type of loan, you may still be able to apply for one of our other non-QM loans.
What Is a Good DSCR Ratio?
As we mentioned before, different lenders look for different minimum DSCR ratios from borrowers. Typically, lenders will require that you have a DSCR of at least 1.25 to take out a loan as a property investor. If your DSCR is higher than that, you may be able to lock in a lower interest rate or make a smaller down payment.
Griffin Funding is a little different when it comes to our DSCR ratio requirement. To qualify for DSCR loans in Virginia through Griffin Funding, you need to have a DSCR of at least 0.75. However, loans with a DSCR below 1 require 12 months of reserves, while loans with a DSCR of 1 or higher require just 6 months of reserves.
If your DSCR isn’t high enough for DSCR loans in VA, you can apply for interest-only loans or other types of loans through Griffin Funding.
Virginia DSCR Loan Benefits
Virginia DSCR Loan Benefits
So, why would you want to opt for a DSCR loan in Virginia? Debt service coverage ratio loans in VA offer several benefits, such as increased flexibility that gives more people an opportunity to invest in property. But there are also many other benefits including:
- Closing times can be quicker since there’s less paperwork involved
- You can qualify without proof of income or employment history verification
- Down payments start at just 20% depending on your DSCR
- We offer competitive interest rates based on DSCR
- DSCR loans can be used for both short-term and long-term rental properties
- Cashout refinance options (Use cash from your current investment property to buy more properties)
- Interest only available
- 40-year or 30-year fixed DSCR loans available
- Loan amounts up to $5,000,000
- Credit scores as low as 640
Unsure what type of loan is the best solution for you? Our loan specialists are happy to help you through the process so you can find a loan program that benefits you most.
What Are the Borrower Requirements for a Virginia DSCR Loan?
In order to qualify for a Virginia DSCR loan and receive your funding, there are a few requirements you’ll have to meet. For starters, your DSCR ratio has to be high enough that a lender agrees to loan you money. You’ll also need to provide a sufficient down payment. At Griffin Funding, we offer DSCR loans with down payments as low as 20%. A minimum credit score is also required.
Keep in mind that you won’t be required to submit proof of income or employment history verification when applying for DSCR loans in Virginia. These requirements are typically the same no matter what state you’re in, so Virginia DSCR requirements should generally apply to all the neighboring states.
Where We Lend
Ready to find a DSCR lender? Griffin Funding serves investors across the state of Virginia, including:
- Virginia Beach
Find Out If You Qualify for a Virginia DSCR Loan
Are you interested in applying for a Virginia DSCR loan? These loans are an excellent opportunity to expand your portfolio as a property investor, especially if you can’t qualify for a traditional loan. You can submit an online application if you’re ready to move forward, or you can learn more about the loans we offer at Griffin Funding by giving us a call at (855) 394-8288 today.