*Quote takes 1 minute, no credit pull
Insurance*1 quote from 40+ carriers
Listings*New listings daily
DSCR Loan North Carolina
Last updated: April 29, 2024
It's no secret that North Carolina is a great place to own rental properties. With property values and rents growing faster than most other markets, North Carolina has become a market that long term investors cannot ignore.
DSCR Loan NC
If you're looking to purchase or refinance a rental property in North Carolina, these are the most important things to consider:
- Non-rural: the property should ideally be in a non-rural market. Properties are considered rural when they are in sparsely populated areas with limited infrastructure. Properties that are considered rural are not a good fit for DSCR loan programs because DSCR lenders and the institutional investors that buy DSCR loans want to make sure the property is in a liquid market where the property can be sold quickly at market value in the event of default or foreclosure. To see if your property would qualifies, use our rural designation tool.
- Minimum Credit Score: while some DSCR loan programs allow a credit score as low as 620, the majority of DSCR loan programs require a minimum credit score of 680. For the best terms (highest LTV, lowest rate), we encourage our clients to maintain a credit score of 720 or higher. The minimum credit score to get a DSCR loan from OfferMarket is 660. DSCR lenders use a Tri Merge Credit Report to identify your "middle score".
- Minimum Loan Amount: most DSCR lenders require a minimum loan amount of $75,000. The minimum DSCR loan amount at OfferMarket is $50,000.
- Minimum As Is Value: the standard minimum As Is value is $100,000. Some DSCR lenders, including OfferMarket, have the ability to go down to $71,500.
- Minimum DSCR: the standard DSCR requirement is 1.1 for high credit borrowers, while minimum DSCR as high as 1.25 is also common. While OfferMarket has a no minimum DSCR option, as well as a 1.0 minimum DSCR option, we strongly recommend our clients to keep DSCR at 1.10 to ensure cash flow and best terms.
DSCR Loan NC Interest Rates
DSCR loan interest rates can be affected by the market in which the property is located. North Carolina is viewed by DSCR lenders as a favorable market and therefore you will be quoted competitive DSCR loan interest rates:
DSCR Loan NC Requirements
- Credit score: 660+
- Borrowing entity: LLC, Corporation, Trust, LP
- Borrowing entity documents: operating agreement/bylaws, articles of organization, certificate of good standing, foreign entity registration
- Lease: for purchased of single family rentals, leases are not required. For purchase of a duplex, triplex and quadplex -- generally up to 1 unit can be vacant without requiring an exception. For refinance, best practice is to have all units leased. If your property is a short-term rental, you should be transparent with your DSCR lender to ensure you are in compliance with program guidelines.
- Rent Receipt: for leased units, DSCR lenders require proof that the tenant is performing. The easiest way to provide proof is with bank statements that show the deposit, or with property management software that shows the tenant is current on their rent.
- Security Deposit: though not required, it is preferred and a best practice to collect security deposit along with first month's rent at time of lease signing. Your DSCR lender will want to make sure you or your property manager are holding the tenant's security deposit.
- Appraisal: a single family rental property will require Form 1004 with a 1007 market rent schedule while a 2-4 unit property will require a Form 1025. The property condition should be no worse than C4 and there should be no deferred maintenance that affects the rent readiness of the property. Learn more about appraisal condition ratings (C1 through C6). DSCR loans require an appraisal and an appraisal risk review. The appraisal is the only item borrowers should expect to pay for prior to settlement. Eligible OfferMarket clients receive a free appraisal, credited back on the settlement statement.
These are the things you will not be asked for:
- Tax returns
- W-2
- Pay stubs
- Employment verification
No Seasoning
If you purchased a property in cash, you can refinance into a DSCR loan with no seasoning. If you purchased the property with a hard money loan (i.e. "Fix and Flip" loan), then you can refinance into a DSCR loan with either no seasoning or 90 days of seasoning. Here is a comparison of your options with OfferMarket as your DSCR lender:
| No Existing Debt | Existing Debt (Option 1) | Existing Debt (Option 2) | |
|---|---|---|---|
| Seasoning requirement | None | 90 Days | None |
| Cost Basis Limit | Max cash to borrower on settlement statement is 100% of cost | 140% LTC | 100% LTC |
| Value Basis Limit | 80% LTV | 75% LTV | 75% LTV |
Pros and Cons of NC DSCR Loans
Given current market conditions, DSCR loans are widely considered to be the most favorable type of financing for rental property investors. Learn more about DSCR loan Pros and Cons.
Best Markets for DSCR Loans in North Carolina
| City | County | Population | Population Growth (annual) | Median Home Price | Median Market Rent |
|---|---|---|---|---|---|
| Charlotte | Mecklenburg, Cabarrus, Union | 920,000 | 1.25% | $395,000 | $2,100 |
| Raleigh | Durham, Franklin, Granville, Johnston, Wake | 489,000 | 1.30% | $442,852 | $2,000 |
| Greensboro | Guilford, Randolph, Rockingham | 305,000 | 0.7% | $255,000 | $1,800 |
| Durham | Durham, Chatham, Orange, Wake | 300,000 | 1.30% | $400,000 | $2,100 |
| Winston-Salem | Forsyth, Davidson, Guilford, Stokes | 253,000 | 0.3% | $250,000 | $1,750 |
| Fayetteville | Cumberland, Bladen, Harnett, Hoke | 210,000 | 0.2% | $210,000 | $1,500 |
| Cary | Wake, Chatham, Durham, Harnett | 185,000 | 1.30% | $625,000 | $2,240 |
| High Point | Guilford, Davidson, Forsyth, Randolph | 116,000 | 0.35% | $235,000 | $1,800 |
| Wilmington | New Hanover, Pender | 125,000 | 1.85% | $400,000 | $2,200 |
| Concord | Cabarrus | 114,000 | 1.75% | $375,000 | $2,000 |
| Chapel Hill | Chatham, Durham, Orange | 67,000 | 4% | $610,000 | $2,400 |
Note: the data in this table is based on recent estimates. Market rent is based on 3BR single family rental properties.
Off Market Listings in North Carolina
Access off market properties in North Carolina on the OfferMarket Investment Property Marketplace.
