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DSCR Loan Ohio


You deserve the best DSCR loan Ohio has to offer. Let's review the merits of DSCR loans, how you can use them to grow your Ohio rental property portfolio, and how to choose the right DSCR lender.


DSCR Loans Ohio


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 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.


As interest rates rise and remain elevated, rental properties in Ohio and much of the midwest continue to be an attractive investment for investors seeking cash flow and optimal cash on cash returns. 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 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.


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. Ohio property taxes are higher than the national average and, depending on the city, can be a substantial drag on DSCR.


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 Ohio, 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 Ohio


If you are buying or refinancing 2 or more rental properties in Ohio, 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 Ohio 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". 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 Ohio if you want to use a DSCR loan:


City Population County
Columbus 940,000 Franklin County
Cleveland 365,000 Cuyahoga County
Cincinnati 313,000 Hamilton County
Toledo 266,000 Lucas County
Akron 188,000 Summit County
Dayton 136,000 Montgomery County
Parma 81,000 Cuyahoga County
Canton 70,000 Stark County
Lorain 65,000 Lorain County
Hamilton 64,000 Butler County
Kettering 58,000 Montgomery County
Springfield 58,000 Clark County
Youngstown 58,000 Mahoning County
Elyria 52,000 Lorain County
Middletown 52,000 Butler County, Warren County
Dublin 52,000 Franklin County, Delaware County, Union County
Cuyahoga Falls 51,500 Summit County
Newark 50,500 Licking County
Lakewood 50,500 Cuyahoga County
Euclid 50,000 Cuyahoga County
Mentor 47,500 Lake County
Mansfield 47,500 Richland County
Strongsville 47,000 Cuyahoga County
Beavercreek 47,000 Greene County
Fairfield 45,500 Butler County
Cleveland Heights 45,000 Cuyahoga County
Huber Heights 45,000 Montgomery County, Miami County
Delaware 43,000 Delaware County
Grove City 43,000 Franklin County
Reynoldsburg 42,500 Fairfield County, Franklin County, Licking County
Lancaster 41,000 Fairfield County
Westerville 40,000 Franklin County, Delaware County
Findlay 40,000 Hancock County
Hilliard 40,000 Franklin County
Warren 38,500 Trumbull County

DSCR Lenders Ohio


You have many choices when it comes to selecting a DSCR lender in Ohio. 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, every single quote, every single loan, every single time.


šŸ“‰ Lower interest rates
šŸ’ø Lower origination fee
šŸ’° Higher LTV
šŸ›Žļø Better service
šŸ‘Øā€šŸ’» Better technology
āš” Faster time to close
šŸ“… 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!

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