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Rhode Island DSCR Mortgage
Rhode Island attracts investors due to its thriving economy, growing population, and high demand for rental properties in major cities. If you are a real estate investor looking to finance your next investment property, a DSCR (Debt Service Coverage Ratio) mortgage loan is the perfect solution. With its flexible qualification guidelines and easy process, a DSCR mortgage loan is one of the best options for real estate investors in Rhode Island.
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Rhode Island DSCR mortgage explained
A DSCR mortgage loan provides a unique opportunity for real estate investors in Rhode Island to finance their properties based on the rental income generated. Besides, DSCR loans allow investors to borrow money through a limited liability company (LLC) or another entity.
Unlike consumer or owner-occupied mortgages, this type of loan is evaluated based on the property’s cash flow, not personal income. It means investors can borrow money through their LLC, rather than using their finances. It allows investors to separate their personal and business finances, reducing their liability and protecting their assets.
Why is DSCR important?
Lenders use DSCR to assess the borrower’s ability to repay the loan. The DSCR is a widely-applicable metric that pertains to corporate, government, and personal finance. In corporate finance, the DSCR is a critical measurement that reflects a company’s available cash flow for meeting its current debt obligations. This ratio is a valuable tool for investors, as it provides insight into a company’s ability to pay its debts based on its available income.
What is a good DSCR?
A good DSCR is anything above 1.0. To calculate DSCR, divide a property’s net operating income by its total debt service (i.e. the payments owed on its mortgage). The DSCR formula is:
DSCR = Net Operating Income / Total Debt Service
Net Operating Income is the amount of money generated by the property after deducting all the operating expenses, such as property taxes, insurance, maintenance, and other costs.
Total Debt Service refers to the mortgage payment owed on the property, including the principal and interest.
Here’s an example of a DSCR calculation:
Let’s say, a property generates $20,000 in net operating income, and its total debt service is $16,000 annually. The DSCR calculation will look like this:
DSCR = $20,000 / $16,000 = 1.25
In this example, the DSCR is 1.25, which is good. It indicates that the property generates enough income to cover its debt obligations, with 25% of the income left after paying off the mortgage.
Why is a Rhode Island DSCR mortgage loan better than a Conventional loan for investors?
Applying for a conventional mortgage can be lengthy and complicated as it requires lots of personal financial documents. Underwriters should thoroughly review your pay stubs, bank statements, and tax returns. Any missing information or inaccuracies in your tax documentation can cause delays.
With a DSCR loan, the focus is on the property value and its expected cash flow, credit quality, and history. The lender will not typically require documentation to verify your employment, income, or assets, beyond the necessary liquid reserves. It makes the application process much simpler and quicker, allowing you to secure the funding you need without spending significant time and effort on the paperwork.
Rhode Island DSCR Mortgage Loan Requirements
- No income reports
- Minimum loan amount is $150K
- Fast closing and flexible terms
- Unlimited number of investment properties
- DSCR should be at least 1.25
- Unlimited cash-out
- $5 million loan amount
- 20% down payment
- Interest-only loan option
- 640+ Credit score
- 3 to 6 months of cash reserves
- Only for investment properties
- Short-term rentals are allowed
- New and experienced investors
Apply for a DSCR mortgage in Rhode Island
Work with LBC Mortgage to take advantage of a DSCR mortgage loan and expand your investment portfolio.
LBC Mortgage is a well-respected and experienced DSCR mortgage company. With a deep understanding of the commercial real estate financing market, our team is dedicated to helping investors secure the financing they need to purchase investment properties.
We understand that securing financing for a real estate investment can be complicated and time-consuming, and our goal is to make it as straightforward and stress-free as possible. Our loan officers have a thorough understanding of DSCR loans and can guide you through the entire process. We will work closely with you to understand your specific needs and goals and use our expertise to help you find the right loan for your investment.
Don’t let a lack of collateral or less-than-perfect credit hold you back from securing the financing you need to grow your business. Contact LBC Mortgage today to learn more and take the first step towards a successful future in real estate investing.