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DSCR Loan New York


Last updated: April 16, 2024


DSCR Loan New York - Cover Photo


If you're looking for the best DSCR loan New York has to offer, this guide is for you. Let's review DSCR loans, how to use them to grow your rental property portfolio in the Empire State, and how to select the best DSCR lender in New York. DSCR loan interest rates are currently volatile, making your choice of DSCR lender all the more important. Did you know that an option New York rental property investors have is a DSCR loan with no minimum DSCR?


Buffalo, NY is a prime rental market thanks to high rent relative to as is value which makes DSCR loans an ideal financing strategy for rental investors seeking to purchase or refinance rental properties.


What is a DSCR loan?


DSCR loans are mortgages for rental properties. DSCR stands for debt service coverage ratio, a simple cash flow metric that indicates whether a rental property's income can sufficiently cover its mortgage payment. A DSCR of 1.0 means the property is at cash flow breakeven which a DSCR above 1.0 means the property more than covers its mortgage payment. A DSCR below 1.0 means the property does not generate enough income to cover its mortgage payment and therefore the owner must contribute additional cash on a monthly basis or raise rent.


DSCR calculation


DSCR = Net Operating Income Γ· Mortgage Payment


As interest rates rise and remain elevated, rental properties in New York continue to be an attractive and viable financing method. All else equal, the higher the interest rate, the lower the DSCR. During periods of elevated interest rates, it's important to invest in rental properties that generate strong rents relative to as is value. This is similar to the 1% rule -- a popular concept among rental property investors that encourages screening for deals where rents will be 1% or more of the cost basis of the property (purchase price, closing costs and rehab). Properties too far below 1% may not generate enough income to cover the mortgage at your target LTV (DSCR is too low). When DSCR is too low at your target LTV, you will need to accept a lower LTV which means you'll need to have a higher down payment. Even if a higher down payment is feasible, it is certainly not ideal if you're focused on optimizing your cash on cash returns.


DSCR Loan Requirements


OfferMarket Other New York DSCR Lenders
Interest Rate Get Instant Quote Get Instant Quote
LTV Purchase 80% 75%
LTV Rate and Term Refi 80% 75%
LTV Cash Out Refi 75% 70%
Minimum DSCR 1.1 1.2
Minimum Credit Score 660 680
Borrower Experience 0+ 1+
Appraisal Direct (save $250) AMC (waste $250)
Seasoning None 6 Months
Origination Fee 0.5% to 1% 2% to 3%
Junk Fees None Common
Time To Close 15 - 25 Days 30 - 60 Days
Quoting Instant Slow
Pre-Approval Letter Instant Slow
Processing Online, Fast Manual, Slow


DSCR Loan Calculator


In order to calculate the loan amount that your rental property purchase or refinance will qualify for, we recommend using a DSCR calculator. It's important to understand the inputs that lenders use to calculate DSCR, this way you can screen investment opportunities and set proper expectations regarding loan-to-value, cash to close and cash on cash returns.


Purchase Price or As Is Value


For purchase transactions, the DSCR calculation uses the lower of the purchase price or As Is value from the appraisal report. For refis, the As Is value from the appraisal report is used. The higher the As Is value, the greater the chance that DSCR will not support maximum LTV. For example, let's say you used the BRRR method on a rental property in Shaker Heights, OH. After your rehab you get the property leased for $2,000 and then the property appraises for $290,000 with a market rent of $1,900. Ultimately, with interest rates elevated, the rental income is only enough to cover closer to 65% LTV than the 75% LTV maximum for cash out refi.


Rents


Most DSCR lenders take the lower of actual in place rent and market rent opinion in your appraisal report. This is why it is critically important keep your lease agreements as close to market rent as possible, and to work with a lender that orders appraisals with appraisers who are experts in rental properties in the local market. If the property is vacant, the market rent opinion from the appraisal will serve as the input for the DSCR calculation.


New York Property Tax Rate


The higher the property tax rate, as verified by the most recent tax bill for the subject property, the lower the DSCR. At an average of 1.6%, New York property tax rate is higher than the national average of 1%. We recommend using a DSCR calculator to understand how property taxes may limit your LTV. If you're a BRRR investor, you don't need to worry as much about property tax rate because the distressed property you rehabbed and are now refinancing likely still has a low property tax rate.


Property Management


While property management is a very real expense that eats into your Net Operating Income, the numerator of the DSCR formula, many lenders do not include property management in their DSCR calculation. If you are not sure if you will use a property management company, to ensure you get the highest possible loan amount, it's best to self manage initially and make that final decision after your DSCR loan is originated.


Utilities


If your tenants are not paying utilities, your DSCR calculation will include utilities as an expense that reduces Net Operating Income and therefore DSCR. We recommend always having your tenants pay all utilities.


Maintenance


Some DSCR lenders include a specific maintenance amount in your DSCR calculation. This may be a $500 or $1,000 annual expense that will reduce your DSCR slightly.


DSCR Loan Interest Rates


DSCR loan interest rates are historically highly competitive with conventional loans for investment properties, and bank loans. During times of economic uncertainty, the DSCR market can become volatile as credit investors including life insurance companies, pension funds, mortgage REITs pause purchases or demand higher interest rates to compensate for an increase in perceived risk. During these times, the firms that aggregate DSCR loans for securitization may demand a higher yield. Ultimately


DSCR Loan Down Payment


For purchases, the lowest down payment available among leading DSCR loan programs is 20% (80% LTV). Many rental property investors look for 85% LTV and we urge you to be cautious if a lender tells you they can provide 85% LTV.


DSCR lenders do a liquidity verification and request up to three months of bank statements. You can use brokerage accounts and retirements accounts as well to confirm you have enough funds to cover your down payment, closing costs and have a healthy buffer in case your tenant is vacant or an eviction is required.


DSCR Loan Credit Score


DSCR loans are highly sensitive to borrower credit score. The minimum credit score requirement to qualify for a DSCR loan is 660. The lower the credit score, the lower your LTV and higher your interest rate. Most lenders require a credit score of 720 and higher in order to qualify for the highest LTV that your DSCR supports.


Most DSCR loan program guidelines require a tri merge report which is a hard pull for all three credit bureaus (Experien, Transunion and Equifax). The highest and lowest scores are ignored and the middle score use used.


DSCR Loan Prepayment Penalty


DSCR loans in New York, just like the rest of the U.S., typically have a prepayment penalty. The 3 year, 3-2-1, and the 5 year, 5-4-3-2-1, are the most common options. Learn more about the concept of a prepayment penalty.


DSCR Minimum Loan Amount


Most DSCR lenders have a minimum loan amount of $75,000. Our minimum loan amount is currently $65,000 for a single property loan and $50,000 for a portfolio loan of 2 or more properties.


DSCR Portfolio Loan New York


If you are buying or refinancing 2 or more rental properties in New York, you can use a DSCR portfolio loan. During periods of market volatility, DSCR portfolio loans may carry a slightly higher interest rate and a slightly lower LTV. If your total portfolio loan amount is high enough, you may be able to qualify for a lower minimum loan and As Is value for individual properties within the portfolio.


Best New York Markets For DSCR Loans


Due to DSCR loan program guidelines, because the majority of DSCR loans are pooled into securitizations, your rental property cannot be considered "rural" for long term rental DSCR loan programs -- this can be a deal breaker in many parts of New York.


While the definition of rural varies by lender, the appraisal report cannot be marked as "rural" -- it would need to be marked "suburban" instead. Even if the property is marked as "suburban" on the appraisal report, the lender may deem the property to be rural if it shows as rural on the CFPB Rural and Underserved Areas Tool, if the local population is below 20,000, or if a simple Google Maps view shows the property is in an area with limited infrastructure -- schools, hospitals, places of worship, grocery stores -- and far from other population centers (in other words, the middle of nowhere).


These are the best rental markets in New York if you want to use a DSCR loan:


City Population County
New York City 8,992,900 Bronx County (Bronx), Kings County (Brooklyn), New York County (Manhattan), Queens County (Queens), Richmond County (Staten Island)
Buffalo 283,500 Erie County
Yonkers 216,200 Westchester County
Rochester 211,600 Monroe County
Syracuse 149,700 Syracuse
Albany 99,600 Albany County
New Rochelle 80,500 Westchester County
Cheektowaga 77,300 Erie County
Mount Vernon 75,900 Westchester County
Schenectady 67,300 Schenectady County
Utica 66,200 Oneida County
Brentwood 62,900 Suffolk County
Hempstead 60,800 Nassau County
White Plains 60,400 Westchester County
Troy 51,800 Rensselaer County
Levittown 51,700 Nassau County
Irondequoit 50,800 Monroe County
Niagara Falls 48,200 Niagara County
Binghamton 48,100 Broome County
West Seneca 45,700 Erie County
Freeport 45,000 Nassau County
Hicksville 44,600 Nassau County
West Babylon 43,200 Suffolk County
Valley Stream 41,600 Nassau County
Coram 40,600 Suffolk County
East Meadow 37,700 Nassau County
Central Islip 37,400 Suffolk County
Brighton 37,300 Monroe County
Baldwin 36,900 Nassau County
Kiryas Joel 36,800 Orange County
Commack 36,700 Suffolk County
Elmont 35,900 Nassau County
Long Beach 35,600 Nassau County
Huntington Station 35,400 Suffolk County
Uniondale 34,800 Nassau County
New City 34,300 Rockland County
Spring Valley 33,600 Rockland County
Oceanside 32,800 Nassau County
Ithaca 32,700 Tompkins County
Port Chester 32,500 Westchester County
Rome 31,600 Oneida County
Franklin Square 31,400 Nassau County
Poughkeepsie 31,200 Dutchess County
Middletown 31,000 Orange County
Centereach 30,800 Suffolk County
North Tonawanda 30,200 Niagara County
Bay Shore 30,100 Suffolk County
Monsey 29,500 Rockland County
Deer Park 29,200 Suffolk County
Saratoga Springs 29,100 Saratoga County
Newburgh 28,900 Orange County
Glen Cove 28,800 Nassau County
Harrison 28,400 Westchester County
Ossining 28,300 Westchester County
Jamestown 28,000 Chautauqua County
Plainview 27,400 Nassau County
Lindenhurst 27,100 Suffolk County
West Islip 26,700 Suffolk County
Auburn 26,600 Cayuga County
Rockville Centre 26,600 Nassau County
Holbrook 26,300 Suffolk County
Peekskill 26,000 Westchester County
Dix Hills 26,000 Suffolk County
Shirley 25,900 Suffolk County
Elmira 25,700 Chemung County
Smithtown 25,400 Suffolk County
Garden City 23,500 Nassau County
Merrick 22,000 Nassau County
Mineola 21,400 Nassau County
East Patchogue 21,300 Suffolk County
Massapequa 21,300 Nassau County
North Bellmore 20,800 Nassau County
Huntington 20,100 Suffolk County
East Northport 20,000 Suffolk County
Hauppauge 19,800 Suffolk County
Syosset 19,400 Nassau County
Melville 19,400 Suffolk County
Ronkonkoma 18,900 Suffolk County
Bethpage 16,700 Nassau County
Westbury 16,100 Nassau County
Manorville 14,300 Suffolk County
Stony Brook 13,400 Suffolk County

DSCR Lenders New York


You have many choices when it comes to selecting a DSCR lender in New York. At OfferMarket, our mission is to help you build wealth through real estate. We accomplish this mission by providing you with the best possible terms and client service, every quote, every loan, every time.


πŸ“‰ Lower interest rates
πŸ’Έ Lower origination fee
πŸ’° Higher LTV
πŸ›ŽοΈ Better service
πŸ‘¨β€πŸ’» Better technology
⚑ Faster time to close
πŸ“… No seasoning


How to apply for a DSCR loan


Applying for a DSCR loan has never been easier. Submit our DSCR loan application for an instant quote and download your pre approval letter in minutes. We do not pull your credit when you submit your application, that is only done once you e-sign our credit release authorization, a later step in our processing once you confirm your intent to proceed with OfferMarket as your DSCR lender.


See how much you qualify for, get your instant DSCR loan quote today!