Are you longing to buy a property in New Jersey but feeling anxious because you lack W2 forms or paystubs to qualify for a loan? No need to fret! We have the perfect solution just for you: DSCR loans. These loans put property income first, removing the requirement for personal income proof when seeking financing, so you can confidently pursue your investment goals!

Understanding DSCR Loans in New Jersey

DSCR loans are financing options specifically designed for real estate investors seeking alternative avenues for funding their investments. Unlike traditional loans, DSCR loans don’t require you to provide personal income or W2 forms. Instead, they focus solely on your property’s ability to generate enough cash flow to cover your debt payments.

It’s all about letting your rental property do the talking!

What debt service coverage ratio (DSCR) is needed to qualify for a DSCR loan?

Having a DSCR of 1 or higher is the target. It means that the rental property you’re investing in generates enough cash flow to cover all the expenses, including the mortgage payments. It’s like having a break-even situation or even a cash flow surplus.

What does the break-even situation mean?

A break-even situation refers to a DSCR value of 1.0. It means that the rental property’s cash flow is exactly enough to cover the mortgage payments and other related expenses.

And what is the surplus cash flow situation?

The surplus cash flow is when the rental property starts bringing in more money than it needs to cover its financial responsibilities, like mortgage payments and operating expenses.

Meeting debt obligations with property income: A New Jersey property example

Here is how John utilized his property’s cash flow to cover his debt payments.

John is a resident of Cherry Hill, New Jersey, who owns a property in the area. With the average home value in Cherry Hill being $399,466, John’s property holds the potential for generating income. By renting out his property, John is able to leverage the average monthly rent of $2,276 to fulfill his debt obligations.

• Down Payment: John is willing to make a 20% down payment of $79,893.4 (20% of $399,466).
• Amount to Finance: The remaining amount John wants to finance is $319,573 ($399,466 – $79,893.4).
• Interest Rate: The loan carries an interest rate of 4%.
• Loan Term: John has opted for a 20-year loan term.

His monthly mortgage payment is approximately $1,942.

Considering the average monthly rent in Cherry Hill is $2,276, John can utilize this rental income to fulfill his debt obligations. With his monthly mortgage payment of $1,942, he has a surplus of $334 ($2,276 – $1,942) from the rental income.

By using this surplus towards his debt payment, John ensures that his property income covers his monthly mortgage payment, thereby meeting his debt obligations effectively.