If you’re an investor looking to buy a rental home in Savannah, you may be considering finance options that are currently available in 2024. One of these options is a Debt Service Coverage Ratio (DSCR) loan, which can be a great way for investors to secure financing with little hassle.
DSCR loans offer competitive interest rates, and flexible repayment terms and are designed to be accessible to those who might not qualify for traditional conventional loans. In this blog post, we will explore the current real estate market in Savannah. Discuss what DSCR loans are and how and if this financing tool is right for you.
Current Real Estate Market Trend for Savannah:
Savannah’s real estate market has been incredibly competitive in recent years, with a shortage of available properties and a healthy demand from buyers. According to Zillow, the median home value in Savannah is currently around $280,000, and it has increased by 12% over the past year, even as the market has returned to a more normal pace. The average days on the market for a property in Chatham County is only 7 days, indicating that properties are still selling quickly.
Bryan County just south of Savannah has grown by nearly 50% over the past decade and is one of the 6 fastest-growing counties in the U.S. Continued growth like this will fuel demand for demand or both permanent residential and rental housing.
What is a DSCR Loan?
DSCR loans are a type of loan that is based on the Debt Service Coverage Ratio of a rental property. The loan is often used for the purchase of both long-term and short-term rentals like Airbnb and VRBO properties. This “coverage ratio” is the key qualifying indicator used by lenders. This coverage ratio is used to determine whether the operating income of the property is enough to cover the debt service (PITI)
Most lenders generally want to see DSCR at 1.0% or greater, however, there are options have permit negative coverage ratios depending on down payment, etc. Learn more about coverage ratios on the DSCR Purchase Page
DSCR Loan Qualifying Steps:
– Calculate the Debt Service Coverage Ratio (DSCR)
– Know your credit score.
– Determine down payment and gather financial asset documents. *Income and employment documents are not needed.
Benefits of DSCR Loans:
-DSCR loans have lower interest rates when compared to Hard Money loans.
-DSCR loans offer a predictable monthly payment.
-DSCR loans are perfect for borrowers who may not qualify for standard bank-conforming loans. DSCR does not require tax returns or W2s thus streamlining the approval process.
-Both rate-term and cash-out refinance options are available. Great for investors that may currently have a hard money loan.
DSCR Loan Drawbacks:
– DSCR loans may have higher upfront closing costs.
– DSCR loans often have a pre-payment penalty.
– DSCR loans may require a larger down payment – generally 20-25%
In conclusion, DSCR loans can fill a valuable nitch for investors purchasing properties in Savannah. The fast underwriting and limited documentation make this a popular choice for investors looking to close quickly. However, it’s important to understand the drawbacks and potential pre-payment penalties that may be involved with DSCR loans. With this knowledge, you can make an informed decision when deciding the best financing option.
If you have any questions about DSCR loans or need help with getting approved, please connect with us by calling the number above or just submit the Quick Call Form