DSCR loans can provide an attractive option for home buyers who are unable to obtain a conventional loan that meets their needs. These loans were originally intended for landlords in Tennessee seeking funds for constructing their own homes.
Additionally, purchasing a house through means other than a DSCR loan would not be an option. Similarly, various types of housing options exist for those looking to purchase homes during times of financial hardship or as part of retirement planning, such as recent credit events loans.
DSCR loans in Tennessee have distinct benefits that make them a compelling choice for borrowers in specific circumstances.
To secure a loan with favorable terms, it is important to meet the requirements set by DSCR lenders. These requirements typically include the borrower having a credit score of at least 680, although higher scores may result in better rates and lower loan payments and income verification unless you can prove the property's cash flow potential.
Additionally, lenders will assess your credit history for other factors, such as the amount and duration of tradelines on your report. They will also consider any significant credit events you may have experienced in the past, such as foreclosures, bankruptcies, or late payments.
To ensure responsible lending practices, lenders typically set the maximum loan-to-value (LTV) ratio for purchase loans at 70% to 80%, depending on factors that qualify, such as property type, creditworthiness, and DSCR ratio.
For refinances, the maximum LTV ratio is usually between 65% and 75%. Additionally, many lenders establish a minimum property value requirement of $150k.
Across the nation, the rate of homeownership currently sits at 64.4%, according to recent data from the U.S. Census Bureau's American Community Survey.
However, it's important to note that this percentage varies significantly from state to state. In Tennessee specifically, we see a higher homeownership rate of 66.5%, surpassing the national average.
Prior to the COVID-19 outbreak, mortgage lending data indicated a significant increase in loan originations across all categories in Tennessee. This included home purchase loans, refinances, and home improvement loans, which experienced notable growth from 2018 to 2019.
Notably, traditional home refinance loans displayed remarkable responsiveness to lower interest rates even before the pandemic took hold. For a detailed analysis of how these trends differed among different lenders based on geography, demographic groups, and income levels, please refer to the complete report.
However, the COVID-19 pandemic introduced unprecedented challenges to the market, leading to uncertainties and significant economic disruptions. In Tennessee, mortgage activity saw a significant boost in 2021.
Homeowners took advantage of favorable interest rates by refinancing their existing mortgages, leading to a 4% increase in both home purchase and cash flow out refinance loan originations compared to the previous year.
Although non-cash-out refinancing experienced a decline of 12%, there was still an overall growth of 4% in refinance loan volume due to nearly a 50% surge in cash-out refinances. This increase can be attributed to the enticing combination of low interest rates and increased property values.
Check out some of Visio Lending's recently closed DSCR loans in Tennessee.