2024’s Best DSCR Loan Companies for Real Estate Investors

Searching for the best DSCR loan companies to amplify your real estate portfolio? Here, we uncomplicate the selection process. Discover top lenders that match your investment criteria, understand what makes them stand out, and strategically choose the one that fits your specific needs—all without a sales pitch. Ready to streamline your pursuit of an ideal DSCR loan partner? Read on.

Key Takeaways

  • Real estate investors have a variety of DSCR loan companies to choose from, each offering unique loan products, qualification requirements, and technological tools such as user-friendly apps to help manage finances and loan options.

  • Key considerations when comparing DSCR loans include interest rates, which can range from 7.25% to 8.25% in 2024, loan terms with diverse options like interest-only or fixed-rate loans, and varying qualification requirements such as minimum credit scores and debt service coverage ratios.

  • When selecting a DSCR loan provider, factors such as the lender’s reputation, loan flexibility, customer service, and support are crucial, along with an awareness of common mistakes to avoid, including inadequate documentation and unrealistic income and expense reporting.

Top DSCR Loan Companies for Real Estate Investors

Real estate investors discussing loan options

As the popularity of DSCR loans has grown, so too has the number of dscr lenders offering these specialized products through their dscr loan program. Each lender has a unique approach, offerings, and level of customer service, which makes it important for real estate investors to find the one that suits them best.

Here’s an overview of some top DSCR loan companies currently influencing the industry.

Griffin Funding

Griffin Funding, a nationwide mortgage loan and DSCR loan provider, has been making waves in the industry with its flexible loan products. Licensed in 21 states, they cater to a wide range of real estate investors seeking rental property financing. One of their standout products is the no-income mortgage DSCR loan, which allows loan amounts up to $5 million. This product requires only a 20% down payment and a minimum DSCR of 0.75%.

Both new and seasoned real estate investors can benefit from Griffin Funding’s specialized support. Investors can gain a more in-depth understanding of their DSCR loan requirements by scheduling a consultation with a loan specialist. However, what really sets Griffin Funding apart is their Griffing Gold app. This user-friendly app offers investors:

  • A central dashboard for financial control

  • Account management

  • Budgeting

  • Debt management

  • Access to specialized loan offerings

Angel Oak

Angel Oak, another leading DSCR loan provider, has a unique approach to loan calculation. Their focus is on cash flow, taking the expected rental income and dividing it by the annual mortgage debt service to determine the debt service coverage ratio. To ensure an accurate calculation, the debt service considered includes:

  • Principal

  • Interest

  • Taxes

  • Insurance

  • HOA fees

Their DSCR product, the 40-year fixed investor cash flow loan, offers interest-only options, loans up to $1.5 million, and no limit on property count for real estate investors. With hard money loans, this diverse loan offering allows investors to tailor their loan to their specific needs, ensuring a positive cash flow.

For a more straightforward process, Angel Oak allows borrowers to connect with loan officers via an online form.

New Silver

Established in 2019, New Silver is a Florida-based private money lender that has quickly risen to prominence. They offer a range of lending products, including:

  • Fix and flip loans

  • Rental loans

  • Ground up loans

  • Personal loans

These products cater to a diverse spectrum of real estate investors, including those interested in investment property.

What sets New Silver apart is their approach to DSCR loans. Their DSCR loan products do not require a minimum DSCR, a feature that facilitates a broader range of investment opportunities. This flexibility is a game-changer for investors looking to finance properties with varying income potentials.

Fidelity Home Group

Fidelity Home Group has made a name for itself in the Florida region by offering a variety of non-QM mortgages, including DSCR loans. This caters to investors who desire flexible and customized loan options that extend beyond conventional financing options.

Their DSCR loans are designed with investor needs in mind, providing the financial support necessary for diverse investment strategies. Fidelity Home Group streamlines the process by offering potential borrowers an online form that quickly matches them with eligible loan programs tailored to their specific circumstances. This feature allows investors to navigate through their loan options with ease, saving valuable time and resources.

First Florida Financial

Founded in 2006, First Florida Financial is a well-established financial provider in the Florida region. They offer a diverse range of financial products, including:

  • Mortgage loans

  • Refinance loans

  • Home equity loans

  • Construction loans

  • Commercial loans

This ensures they can cater to a broad range of investor needs.

Among their offerings, they provide DSCR loans, providing an alternative financing option for real estate investors. Their long history and wide array of product offerings make them a reliable choice for investors seeking DSCR loans.

Tuss Financial Group

Tuss Financial Group specializes in stated income mortgages and DSCR loans targeted at business owners and those with varying personal income. They offer DSCR loans ranging from $100,000 to $3 million, providing a wide range to cater to various investment levels. One unique feature of their offerings is the ‘no ratio’ option, which is beneficial for investors whose rental income doesn’t cover the mortgage debt.

Tuss Financial Group enhances the convenience of the loan application process by providing a form that allows investors to swiftly match with eligible loan programs tailored to their specific circumstances. This feature, coupled with their unique offerings, makes them a standout choice for investors seeking DSCR loans.

Comparing DSCR Loan Companies

Comparison of DSCR loan companies

A critical step in securing a loan is comparing DSCR loan companies. Evaluating key factors like interest rates, loan terms, and qualification requirements enables investors to make informed decisions that complement their investment strategies and financial objectives.

Interest Rates

Interest rates play a critical role in the financial feasibility of a DSCR loan. These rates are influenced by the 5 Year US Treasury rate and a borrower credit spread that adds from 3.25% to 4.5% based on various factors. For 2024, the projected interest rates for DSCR loans are expected to fluctuate within the range of 7.25% to 8.25%.

A strong borrower credit score can significantly reduce the interest rate for a DSCR loan, which also affects the loan-to-value (LTV) ratio the borrower may qualify for. Many DSCR loans offer fixed interest rates, which provides stability and predictability in mortgage payments for real estate investors.

Borrowers can potentially receive a lower interest rate on a DSCR loan by opting for a higher and more extended prepayment penalty. Understanding these factors can help investors negotiate optimal interest rates, contributing to the success of their investment ventures.

Loan Terms

Loan terms for DSCR loans vary significantly among lenders, providing investors with a range of options to suit their specific needs. For instance, Truss Financial Group offers DSCR loans with a maximum of $30 million, a 30-year repayment period, and fixed interest rates. On the other hand, Sprint Funding provides short-term six-month DSCR loans and longer 30-year term loans up to $3 million.

Lima One Capital offers loan structures that include:

  • Fixed-rate

  • ARM

  • Interest-only

  • Fully amortized

  • Balloon repayments

to cater to various investor preferences. A higher DSCR ratio and a larger down payment may lead to better loan terms, such as lower interest rates. Understanding the various loan terms available can help investors choose the most suitable DSCR loan for their unique investment strategy.

Qualification Requirements

Qualification requirements for DSCR loans vary among lenders. These requirements often include:

  • Minimum credit scores

  • DSCR ratios

  • LTV ratios

  • Reserve requirements

For DSCR loans, minimum credit scores can start as low as 640 and go as high as 680.

Lenders generally prefer a service coverage ratio DSCR of 1.2 or higher, though this may differ. Properties with a DSCR of less than 1.0 may also qualify under certain conditions. The LTV ratios are also a critical qualification criterion, affected by credit score and desired loan size.

Moreover, reserve requirements range from three to twelve months and can be met with various types of accounts. Borrowers must also provide specific property information, and while net operating income and cash on cash return aren’t considered for qualifying, liquid assets at closing and no other liens are essential requirements for bank statement loans.

How to Choose the Right DSCR Loan Company

Customer reviewing lender reputation and reviews

Selecting an appropriate DSCR loan company entails considering several factors, including:

  • Loan terms and interest rates

  • Company reputation

  • Customer reviews

  • Loan programs offered

  • Flexibility in loan options

  • Customer service and support

Considering all of these factors will help you make an informed decision when choosing a DSCR loan company.

Reputation and Reviews

The reputation of a lender is pivotal for DSCR loans because it mirrors their expertise and dependability in the non-QM loan sector. Evaluating reviews from other real estate investors offers a window into the lender’s history with DSCR loans and the degree of past client satisfaction.

A distinguished DSCR lender should have:

  • A proven record of successfully financing investment properties

  • Customer feedback and industry ratings that substantiate their reputation

  • Valuable insights into their business practices, customer service, and loan offerings through research and reviews

Loan Programs and Flexibility

The flexibility offered by different DSCR loan programs is another crucial factor in choosing the right lender. DSCR loan programs vary significantly, providing options like:

  • interest-only payments

  • flexible repayment terms

  • adjustable interest rates

  • low down payment options

These programs cater to a diverse range of financing needs, including those with monthly payments.

Specialized DSCR programs exist to serve unique investor niches, such as short-term rentals, with continuous innovations like options for medium-term rentals and mixed-use properties. DSCR loans offer flexibility with fixed or adjustable rates and a choice of amortization periods, which can be important for aligning with an investor’s long-term financial strategy.

Investors also benefit from the possibility to finance multiple properties with a single DSCR loan, and lenders may vary qualification rules, offering an attractive alternative to conventional financing.

Customer Service and Support

Exceptional customer service and support are essential aspects of a DSCR loan company’s offerings. Support from knowledgeable loan officers who understand the specifics of DSCR loans can help investors navigate the application and approval process more effectively. A lender’s dedication to personalized assistance and advice tailored to an investor’s unique situation can be a decisive factor in choosing a DSCR loan provider. Having direct access to knowledgeable loan officers who are familiar with the nuances of DSCR loans can significantly improve the customer service experience for borrowers.

It is also important for a DSCR loan company to provide clear and consistent communication throughout the loan process to build trust and ensure borrower satisfaction. Post-loan support, such as assistance with payment issues or refinancing options, is an essential service aspect that can impact long-term satisfaction with a DSCR loan company.

Common Mistakes to Avoid When Applying for a DSCR Loan

Applying for a DSCR loan can be a complex process, and it’s easy to make mistakes that could potentially affect your loan application. Here are some common missteps to steer clear of when applying for a DSCR loan.

Some common issues that can complicate the evaluation process for lenders include:

  • Lack of detailed documentation such as a 12-month rental ledger

  • Insufficient record keeping for the DSCR application

  • Overstating the property’s net operating income by neglecting to include all operating expenses and vacancy rates

These issues can result in an unrealistic DSCR, affecting loan eligibility.

Under-reporting total debt obligations can artificially inflate the calculated DSCR, creating unrealistic expectations of the property’s financial health. Ignoring rental history records or frequently using the property for personal use can also lead to an unfavorable DSCR calculation.

Overlooking the condition and market value of the property can negatively affect the potential rental income, which is a key component in determining the DSCR.

Summary

In conclusion, DSCR loans offer a viable financing option for real estate investors. With various lenders offering unique loan programs, it’s crucial to compare and choose the right DSCR loan company that aligns with your investment goals. Consider factors such as lender reputation, loan flexibility, customer service, and support in your decision-making process. Avoid common mistakes when applying for a DSCR loan to ensure a smooth application process. With the right knowledge and guidance, you can leverage DSCR loans to realize your real estate investment dreams.

Frequently Asked Questions

Which lenders offer DSCR loans?

New Silver Lending, Kiavi, Griffin Funding, Angel Oak, Truss Financial Group, and Lima One Capital are some lenders that offer DSCR loans, providing a variety of options for real estate investors.

How much do you need down for a DSCR loan?

For a DSCR loan, you typically need a down payment of 20-30% of the property value. However, some lenders may offer lower down payment options to borrowers with strong credit and experience with investment properties.

What is the minimum FICO score for a DSCR loan?

For a DSCR loan, a minimum FICO score of 680 is typically required by lenders. Keep in mind that a higher credit score can lead to better interest rates and loan terms.

What is the current DSCR loan rate?

The current average DSCR loan interest rate is between 7.20% and 8.57%, as of the latest data. The index is currently at 7.727%. This information is important to consider when making borrowing decisions.

What is a DSCR loan?

A DSCR loan is a flexible financing tool for real estate investors, primarily based on the cashflow of the investment property rather than personal income.