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DSCR Loans: The Smart Choice For Virginia Investors
Are you looking to buy or refinance an investment property in Virginia, but don’t have enough personal income to qualify? Or maybe you don’t want to give your tax, financial, and employment paperwork. If so, the DSCR loan in Virginia may be just what you’re looking for. With this program, you can use the rental income from the property to qualify for the loan. This can be a great way to get into the investment property market without having to make a huge personal financial commitment.
In essence, the DSCR is a measurement of a company’s ability to pay its debts. It’s a simple idea, but it’s one that can have a big impact on a firm’s financial health. The DSCR is used by investors to assess a company’s creditworthiness. If a company has a low DSCR, it may be considered a higher-risk investment.
Calculate a DSCR Loan
To calculate the DSCR, you simply divide the company’s available cash flow by its total debt obligations. This gives you a percentage that shows how much cash flow the company has available to pay its debts. The formula looks like this:
DSCR = Net Operating Income / Total Debt Service
Net Operating Income can be calculated as Revenue – Operating expenses
Total Debt Service means debt obligations of the business.
The higher the DSCR, the more likely you are to get a loan. So if you’re hoping to get a loan, make sure your DSCR is as high as possible!
What Is a Good DSCR Ratio?
A company with a DSCR of 1.0 or higher is considered to have a high DSCR, which indicates that a company is in good financial shape and has plenty of cash available to cover its debts.
Anything below 1.0 is considered a low DSCR, indicating that a company may have difficulty meeting its debt obligations.
For this reason, the DSCR is an important metric for both investors and creditors. If you’re thinking of investing in a company, or if you’re considering lending money to a company, be sure to check out its debt-service coverage ratio before making any decisions.
Ways To Increase The DSCR Ratio
A business can increase its DSCR ratio by implementing one or more of the following methods:
- By increasing its net operating income, a business will increase the amount of cash available to make debt payments.
- Increasing efficiencies will help a business to produce more with less, resulting in increased profits and cash flow.
- Payment of existing debt will reduce the amount of money owed each month, freeing up cash flow for other purposes.
- Reducing the amount of the loan request will lower the monthly payment amount, making it easier for the business to meet its financial obligations.
Each method has its own merits, and a business should carefully consider which option is best for its particular situation.
DSCR Loan Requirements in Virginia
- Minimum loan amount is $150K
- Your credit score should be 640 or higher
- You should have at least 6 months of reserves
- 20% down payment
- Your property income must be at least 25% higher than your monthly loan payment. In other words, you need to have a minimum DSCR of 1.25.
- Short-term rental allowed
- Unlimited cash-out
- Interest only loan is possible
- Not for first-time home buyers
- First time investors allowed
- Loan amounts up to $5 million
It is also important to mention that the total cost of the Virginia DSCR mortgage tends to be higher because the maximum LTV ratio is usually 80%. But investors are often willing to pay these higher costs because DSCR loans offer them a way to buy an income-producing property with less money down. So if you’re considering a DSCR loan to finance your next investment property purchase, just be sure to factor in the additional costs before you commit.
DSCR Mortgage Benefits
DSCR loans offer a number of benefits that are well worth considering while purchasing a property.
- First and foremost, personal income is not taken into account by lenders when determining eligibility for a DSCR loan. This means that even if you don’t have a high income, you may still be able to qualify for this type of loan.
- DSCR loans tend to have quicker application and closure times than other types of loans.
- You can commit to many properties at the same time with a DSCR loan, which is perfect for investors or those who are looking to purchase multiple properties.
- Don’t worry about providing a W-2 – none is required.
- DSCR loans are available for amounts ranging from $350,000 to $5 million.
So if you’re looking for a high-reward loan option, a Virginia DSCR loan is definitely worth considering.
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Applying For a DSCR Mortgage In Virginia
Ready to learn more about DSCR loans and see if you fit the criteria? Contact LBC Mortgage today! Our experienced loan specialists will help you better understand the process as well as help you get started on your loan application. We know the ins and outs of DSCR loans in Virginia, and we’re here to help you every step of the way.
So what are you waiting for? Give us a call today!