(Mar 27, 2023)
Understanding the ins and outs of DSCR loans in Putnam County is essential to decide if it’s ideal for your situation. This article will walk you through everything you need to understand, from the DSCR loan basics to why you should get it, how it works, the calculations, income limit, the DSCR payment, and the minimum DSCR in Putnam County, Florida.
We’ll also discuss the five best cities in Putnam County, Florida to invest in real estate. Read on to discover more.
The Basics of DSCR Loans
A Debt Service Coverage Ratio (DSCR) Loan is a real estate loan that allows borrowers to borrow money to purchase an investment property without providing collateral. In other words, the borrower only needs enough down payment and a target property to cover the amount they're borrowing.
You'll use the property income to repay your DSCR loan, meaning your lender will expect some of the income from your rented-out properties to help with that. Usually, you don’t need to worry about the financial requirements since you’ll make more than enough from the rentals to cover the loan interest and the principal repayment.
Be advised that not all investors are eligible for these loans, as they come with lenient eligibility criteria. For instance, you need at least a 15% down payment on the property, an excellent credit score, and a considerable cash reserve, to name just a few of the strict qualifications you must meet.
Reasons to Get a DSCR Loan in Putnam County, Florida
Whether you’re building your first real estate investment portfolio or are looking to expand it, a DSCR loan is one of the best ways to get started.
These loans are designed to work with investors and their real estate projects and help provide an additional source of financing for projects beyond traditional bank loans.
The guide below will help you understand why getting a DSCR loan in Putnam County, Florida is worth it.
Easy to Qualify
If you have a low income and high debt ratio, you may still qualify for a DSCR mortgage to purchase a house if you work closely with a DSCR lender. Qualifying for this type of mortgage is more manageable than other real estate investment mortgages.
Even if your business is brand new, you have a low credit score, you’re a foreigner, or you want to borrow in an entity or LLC, you may still qualify for a DSCR loan. Get in touch with your local lender to find out what they need.
Investment Options
Putnam County real estate offers several possibilities, such as buying land, designing and building your property, purchasing an existing structure, repairing it, and renting it out or selling it for a profit.
Generally, the county gives you various real estate investment options, and DSCR loans are an excellent place to start if you're new to real estate investing.
The DSCR Loans are Safe
The main benefit of getting a DSCR loan is that it’s safer for your real estate investment. Your personal property serves as collateral in case of a missed payment, so you never have to fear the forfeiture of your assets. Not only is this type of loan much safer than many others, but it also has a very competitive interest rate than other real estate investment loans today.
Other loans and conventional financing options may require Private Mortgage Insurance (PMI), but DSCR loans don't. Although PMI isn't inherently wrong, it does have many constraints. It’s generally an extra fee you must pay to serve as security if you default on your loan. Lenders use it as an insurance policy to reduce risk, but you don’t have to worry about it when applying for a DSCR loan in Putnam County.
The Real Estate Market is Booming
Putnam County is one of the most sought-after states for investors because of its flourishing real estate market. The population has been steadily growing, and this has led to an increase in jobs. With more jobs comes more property prices, meaning more opportunities for real estate investment in Putnam.
While this also leads to more competition among investors who want to get into the booming market, everyone gets their fair share in this thriving market. A growing population opens up more opportunities for real estate investors, which is good news for landlords. Putnam County has higher rental and minimal vacancy rates, so you won't waste time searching for tenants.
Flexibility
A DSCR loan is a flexible financing option for real estate investors and is available for single-family homes, townhouses, condos, etc. This type of loan is typically only available for investment properties that are rented out, and the tenants pay the rent to help you pay back the loan.
Putnam is an Ideal Destination for Everyone
Several reports and websites rank Putnam County, Florida, as one of the best places in the U.S. to live and work. People have chosen to relocate to this beautiful region in the last decade for various reasons.
The following are the main reasons why Putnam County has become an ideal destination and home for new residents, making DSCR loans worth it for real estate investors:
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Proximity to New York City.
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Plenty of events & activities.
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Beautiful scenery and natural resources.
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Great schools and healthcare facilities.
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Multiple job opportunities for job seekers.
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A welcoming community.
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No social security tax.
- A business-friendly environment for entrepreneurs.
How DSCR Loans Work
The DSCR loan is generally the most reliable mortgage for property investors in the lucrative real estate investment industry. These loans can help you achieve your real investment goals, as explained in the following guide.
DSCR loans rely on your investment income and not your gross income. This is an excellent way to bolster your real estate portfolio since you don’t need to show any proof of income to qualify. Even if you don’t make a lot of money or own many assets, you can apply for a DSCR loan if your target investment property can bring in sufficient income to cover the monthly loan payments.
DSCR loans are perfect for investors who want to implement their excellent idea for investing in real estate but lack the financial muscle. You’ll be allowed to pay back the DSCR loan with your property income without using your traditional income, such as salary or side hustle income.
Eligibility Requirements
While DSCR loans allow you to finance investment properties without filling out a lot of complex documentation, they come with several eligibility requirements based on your income and debt obligations. DSCR loan eligibility is determined by reviewing the following qualifications:
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Loan type (5-year and interest-only ARMs, 30-year fixed rates, etc.)
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The number of investment properties under your name.
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Closing under the name of an LLC or entity.
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Loan-to-value (LTV) ratio of 75% to 80%.
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The property’s prospective rental income.
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Income and employment history.
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A credit score of 640 or higher.
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Seller-paid closing costs.
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Debt-to-income (DTI) ratio.
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Prepayment penalties.
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Maximum loan amount.
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The loan purpose.
- Cash reserves.
It’s essential to contact your lender before submitting your application to ensure you understand their specific requirements and avoid potential frustrations like loan denial.
How to Calculate DSCR
It is calculated by adding up all your monthly income and mortgage payments, including principal, interest, taxes, insurance (PITI), homeowner's association (HOA), and other fees. DSCR is typically expressed as a decimal (1.25x and 1.25). 1.25x means a property has 25% more income than its monthly mortgage payments. Rates above 1.0 generally indicate good chances, while rates below 1.0 indicate poor possibilities.
Generally, the formula for DSCR calculation is expressed as DSCR = income/payments. For instance, if your property investment generates an income of $2,500 and your monthly payments are $2,250, your DSCR is 1.11. If you want to improve your DSCR to indicate good prospects, raise or reduce the rent or monthly expenses.
How to Determine DSCR Income
The DSCR income for a residential investment property is based on your monthly income, while commercial DSCR income is based on the property's Net Operating Income (NOI).
A property's Net Operating Income is determined by subtracting operational costs, such as taxes and maintenance, from your property income.
How to Determine DSCR Payment
Generally, your DSCR payment includes HOA fees, principal, interest, taxes, and insurance (PITIA). It would be best to contact your DSCR lender to determine your exact payment amount and interest rate. DSCR income, personal credit score, and debt-to-income ratio will all be considered when lenders determine your repayment plan.
One of the most important factors to consider when applying for a DSCR loan is how your expenses and income will affect your loan payment. Note that the lower your expenses, the higher your income is. You could raise the rent to generate a substantial income or make a larger down payment on your property to lower your monthly loan payments.
The Minimum DSCR in Putnam County, Florida
Loan providers in Putnam County might differ, but typically a mortgage will be approved with a minimum DSCR of 1.25x. Not all lenders approve loans with a lower DSCR, however.
Talk to your DSCR lender in your particular region in Putnam County for specifics about how much DSCR you qualify for and your payment options.
The 5 Best Cities in Putnam County, Florida to Invest in Real Estate
Investing in Putnam County, Florida, can be pretty rewarding if you know where to buy real estate and which neighborhoods are ripe for buying at the right price.
However, finding the best city to invest in real estate can seem impossible, so we’ve taken the guesswork out of the equation with the following guide on the five best cities in Putnam County, Florida, to invest in real estate.
Palatka
If you're looking for a laid-back town with a rich history, Palatka is the place for you. This city has seen tremendous growth over the past decade and is poised for even more in the future. The typical home value in Palatka is $193,955, which has increased by 22.3% since the past year.
With its proximity to Jacksonville and St. Augustine and low crime rates, Palatka might be your best bet when looking for a reliable investment town. As a bonus, prices are still relatively low here, so starting your investments won't cost you much.
Interlachen
This is a small town with a population of just over 1,400 people. The crime rate is relatively low, and the schools are ranked as A+ by the state education department. This city seems like an excellent place to invest in real estate right now! The home value in Interlachen is $178,190, which has gone up 23.4% from the last year.
One factor that attracts new residents is the overall affordability of homes in Interlachen. It also offers a small-town feel with many amenities for its citizens - there are four restaurants, supermarkets, hair salons, healthcare facilities, gas stations, and grocery stores. Additionally, it is easy to get around Interlachen using public transportation. The public bus services run frequently and operate on a predictable schedule.
Crescent City
As with many other cities in the United States, Crescent City has seen a rise in population as more and more people are looking for an affordable place to live without sacrificing their quality of life. With a population of just over 1,600 people and growing at a higher rate per year, Crescent City is the perfect place to invest. The home value in Crescent City is $204,095, which increased by 24.9% from the last year.
Crescent City is small but offers ample opportunities for potential business owners because its prime location makes it easy for goods and services to be transported. The cost of living is also low due to the city’s proximity to larger towns like Orlando, meaning residents have a good chance of making enough money to save or even afford essential luxuries. All these are some of the advantages that attract new residents and, in turn, create significant opportunities for real estate investors.
East Palatka
East Palatka is a close-knit community and has seen some of the most positive growth in Putnam County. The home value in East Palatka is $270,607, which has gone up 24.1% since the last year.
The city is home to multiple public school districts, private schools, and healthcare centers. Residents can access many recreation areas, including the East Palatka Community Park, which has tennis courts, basketball courts, soccer fields, hiking trails, picnic pavilions, and more. New restaurants, breweries, and shops have been popping up all around town, making it a perfect place for families and a profitable area for residential property investors.
Welaka
This is a beautiful place to live, with easy access to the Atlantic and Gulf coasts. With its small-town charm and proximity to Ocala, it's no wonder that Welaka is such a popular destination for families and a goldmine for real estate investors. The home value in Welaka is $289,428, which has increased by 29.7% from the past year.
Its proximity to major cities in Florida means plenty of jobs are available. Because of its lack of congestion, commute time is significantly less than in other nearby cities, and the schools are among the best in Putnam county. There are plenty of family-friendly activities, including festivals, fireworks, and fishing competitions. With Welaka’s growing population, you can’t waste time looking for long-or short-term tenants for your investment property.
Bottom Line
Today, the real estate market in Putnam County, Florida, is booming. Investors and homebuyers are lining up to take advantage of the low-interest rates available through DSCR loans.
These loans offer an alternative to traditional bank loans, and they can be used by experienced and first-time investors alike to build their real estate portfolios quickly and easily.
Contact your local lender to confirm your eligibility and the assistance you need to apply for this outstanding investor loan.
(Mar 27, 2023)
