Get Expert Investment Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Introduction: Why Michigan Investors Use DSCR Loans
Michigan’s real estate market offers diverse opportunities, from urban rentals in Detroit to vacation properties along the Great Lakes. For investors aiming to expand their portfolios, Debt Service Coverage Ratio (DSCR) loans provide a flexible financing option that focuses on property income rather than personal income.
What Is a DSCR Loan?
A DSCR loan allows investors to qualify for financing based on a property’s rental income. Instead of evaluating the borrower’s personal income, lenders assess whether the property’s income covers its debt obligations. This approach is particularly beneficial for self-employed individuals or those with multiple investment properties.
Benefits of DSCR Loans in Michigan
- No Personal Income Verification: Ideal for self-employed investors or those with complex financial situations.
- LLC-Friendly: Many DSCR loans allow properties to be purchased under an LLC, offering liability protection.
- Scalability: Investors can finance multiple properties without traditional loan limits.
- Flexible Property Types: Applicable to various property types, including single-family homes, multi-units, and short-term rentals.
Michigan DSCR Loan Requirements
- Minimum DSCR Ratio: Typically 1.0 or higher; some lenders accept lower ratios with additional conditions.
- Credit Score: Minimum scores range from 620 to 680, depending on the lender.
- Down Payment: Generally 20% to 25% of the property’s purchase price.
- Loan Amounts: Loan sizes can range from $75,000 to $3 million.
- Property Use: Must be for investment purposes; owner-occupied properties are typically ineligible.
How to Apply for a DSCR Loan in Michigan
- Identify a Suitable Property: Focus on properties with strong rental income potential.
- Calculate DSCR: Use the formula: Net Operating Income / Debt Service.
- Gather Documentation: Prepare property-related documents, such as lease agreements and appraisals.
- Choose a Lender: Research lenders specializing in DSCR loans within Michigan.
- Submit Application: Provide the necessary documentation and await approval.
Top Cities for DSCR Investing in Michigan
- Detroit: Offers high rental yields and a growing demand for housing.
- Grand Rapids: Known for its stable economy and strong rental market.
- Ann Arbor: Home to a large student population, ensuring consistent rental demand.
- Kalamazoo: Provides affordable property prices with favorable rent-to-price ratios.
Final Thoughts: Is a DSCR Loan Right for You?
DSCR loans present a valuable financing option for investors focusing on income-generating properties in Michigan. By emphasizing property income over personal financials, these loans offer flexibility and scalability for growing real estate portfolios.
Get Expert Investment Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
