New Hampshire DSCR Loans
New Hampshire, also known as the “Granite State,” offers a diverse range of opportunities for real estate investors. From its picturesque mountains and serene lakes to its rich history and vibrant arts and culture scene, New Hampshire has great investment potential. And with New Hampshire DSCR mortgage loans, investing in properties has never been easier!
With a DSCR mortgage loan, investors in New Hampshire can take advantage of the state’s strong rental market and purchase properties with the confidence that they will generate enough income to cover the loan payments. So, if you’re looking for a fast and easy way to invest in the real estate market, a DSCR mortgage loan is the perfect solution for you.
What is a New Hampshire DSCR mortgage loan?
A New Hampshire DSCR mortgage is a loan based on the cash flow of the property and the ability of the borrower to make payments. It is used for commercial properties, including rental properties.
To calculate DSCR, you need to divide the property’s net operating income (NOI) by the total debt service (i.e., the mortgage payments, including interest and principal). In other words, it compares the cash flow generated by a property to the amount of debt used to finance it.
A DSCR of 1.0 or higher is sufficient to qualify for a loan, as it indicates the property is generating enough income to cover its debt payments.
Let’s say a borrower is looking to purchase a rental property for $500,000 and plans to rent it out for $4,000 per month. The annual mortgage payment on the loan is $60,000 (based on a 30-year fixed-rate mortgage at 4% interest).
To calculate the DSCR, we take the annual rental income ($48,000) and divide it by the annual mortgage payment ($60,000):
DSCR = $48,000 / $60,000 = 0.8
In this case, DSCR 0.8 means that the rental income is not enough to cover the mortgage payments. And most lenders will require a DSCR of at least 1.25 to approve a loan.
The calculation may vary depending on the lender’s requirements and the specific details of the loan. Moreover, in calculating your DSCR ratio, consider other expenses such as property taxes, insurance, and maintenance costs.
Top 3 mistakes when calculating DSCR
Not including all operating expenses
When calculating the DSCR, it’s important to include all operating expenses, such as property taxes, insurance, repairs and maintenance, and management fees. If any of these costs are omitted, the DSCR will be overstated, and the lender may not approve the loan.
Not considering the amortization schedule
The DSCR calculation should take into account the amortization schedule of the loan, as the amount of principal and interest payments changes over time. If the amortization schedule is not considered, the DSCR may be inaccurate and the lender may not approve the loan.
Not adjusting for seasonal fluctuations
Some properties, such as vacation rentals, may have significant seasonal fluctuations in rental income. If the DSCR calculation is based on an average income throughout the year, it may not accurately reflect the property’s ability to service the loan during low-income periods.
How to qualify for a DSCR loan in New Hampshire?
To qualify for a DSCR mortgage loan, you must meet the following requirements:
- Minimum paperwork and no income reports are required
- Fast closing and flexible terms
- Unlimited number of investment properties owned or financed
- Short-term rentals are allowed
- Your DSCR should be at least 1.25
- Unlimited cash-out
- Loan amount – $5 million
- 20% down payment
- Interest-only loan option
- 640+ Credit score
- 3-6 months of cash reserves
- Not for the residential properties
- New and experienced investors
DSCR loan vs. Conventional loan
Both DSCR loans and conventional loans can be used to purchase or refinance real estate properties. However, there are some key similarities and differences between the two.
DSCR loan vs. Conventional loan – what’s in common:
- Based on the borrower’s creditworthiness, income, and assets.
- Require that the borrower have a stable income.
- Require that the borrower provide documentation of their income and assets.
DSCR loan vs. Conventional loan – key differences:
- DSCR loans are designed specifically for income-producing properties, while conventional loans can be used for any type of property including residential.
- DSCR loans have higher interest rates than conventional loans because they are considered to be higher risk.
- DSCR loans require a higher debt service coverage ratio (DSCR) than conventional loans. This means that the borrower must have a higher income-to-debt ratio to qualify for a DSCR loan.
- Conventional loans have a more standardized underwriting process and more lenient guidelines.
Apply for a DSCR Mortgage loan in New Hampshire
Looking to maximize your investment return? Look no further than a New Hampshire DSCR mortgage loan! With flexible terms and a streamlined process, our team at LBC Mortgage can help you secure the funding quickly and easily to take your real estate goals to the next level.
Don’t let traditional lending constraints hold you back – let us show you how a DSCR loan can work for you and your investment portfolio. Contact LBC Mortgage today to learn more about DSCR loans in New Hampshire, or get a free quote today.