Colorado DSCR Loans
Colorado is a great state to invest in real estate because of its strong economy, and growing population. As a result, investing in real estate in Colorado can be a great way to build a long-term wealth strategy. Colorado DSCR mortgages are designed specifically for new and seasoned investors offering borrowers competitive rates and terms.
Colorado DSCR loan meaning
The debt service coverage ratio (DSCR) is a financial ratio that is used to measure a company’s ability to repay its debt obligations.
To calculate the DSCR, you simply divide the property’s annual net operating income (NOI) by its annual debt service (i.e. mortgage payments). The resulting number tells you how many times over the debt is covered by the NOI.
A company with a DSCR of 1.0 or higher is considered to have sufficient income to cover its debt obligations. A company with a DSCR of less than 1.0 is considered to be at risk of defaulting on its debt payments.
The DSCR is an important tool for lenders when assessing a company’s creditworthiness. It can also be used by investors to assess a company’s financial health.
The example of DSCR calculation
For example, if your rental property’s net operating income is $7,800 and the annual mortgage payment is $4,200, the DSCR would be calculated as the following:
DSCR = NOI / Debt Service. $7,800 NOI / $4,200 Debt Service = 1.85.
The DSCR of 1.85 is considered to be high enough to qualify for a DSCR mortgage loan in Colorado.
DSCR Loan Rates In Colorado
The current DSCR average loan rate is between 7.20% and 8.57% for loans with a 25% down payment and a DSCR of 1.2. The rate for your loan might be higher or lower depending on the lender, points paid, and your scenario.
To get the best rate possible, contact LBC Mortgage to compare rates from multiple lenders and to understand the factors that can affect your rate. Paying points up front can help to lower your interest rate, but this isn’t always the best option depending on your situation.
Colorado DSCR mortgage loans vs. commercial loans
There are many benefits to using a DSCR mortgage in Colorado. First and foremost, DSCR loans are more cost-effective than commercial loans, because they are based on the property’s net operating income rather than the value of the property itself. This can be a huge advantage for investors looking to finance an investment property in Colorado, as it can help keep interest rates low and monthly payments manageable.
Additionally, DSCR mortgages come with longer terms compared to commercial loans, giving investors more time to generate a return on their investment.
Whether a DSCR mortgage is right for you will depend on your specific circumstances and goals, but it is definitely worth considering if you’re looking to finance an investment property in Colorado.
Colorado DSCR loan requirements
Here are the DSCR mortgage loan requirements in Colorado:
- No income or job history
- Interest-only payment option
- Credit score – 640 and above
- Low down payment – just 20%
- Up to $5mln of the loan amount
- Delayed financing option
- No personal income calculations
- Unlimited cash-out opportunities
- Short-term rentals are allowed
- LLC, partnership, or US-based corporation
- New and seasoned investors are allowed
Who is the DSCR loan for?
A DSCR loan in Colorado can be a good option for borrowers who are seeking flexibility in their financing. With this type of loan, the monthly payments can fluctuate based on the cash flow of the business. This program can be helpful for businesses that have variable income or expenses. However, it’s important to note that this also means that the total amount of interest paid on the loan may be higher than with a fixed-rate loan.
DSCR mortgage broker in Colorado
At LBC Mortgage, we work with multiple DSCR lenders to ensure that our clients have access to the best possible loan terms. Whether you’re looking for a longer repayment period or a lower interest rate, we’ll work with you to find a loan that meets your needs. And because we’re a leading mortgage company in Colorado, we have the experience and knowledge to get the job done right.
So, if you’re ready to take the next step in your investment property journey, give us a call today. We’ll be happy to help you find the perfect loan for your needs.