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🛠️   INVESTOR TOOLS
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DSCR LOANS

(Debt Service Coverage Ratio)

DSCR Loans for Real Estate Investors

A DSCR loan works similarly to a standard home loan, with one important difference. Instead of using your income tax returns, a DSCR loan uses the rental income for the property itself to qualify for the loan.

 

A standard appraisal is ordered, and a licensed appraiser provides a standard residential appraisal report, along with a supplemental report called a Market Rental Analysis Report which provides the average market rent for similar homes in the surrounding marketplace.

💡 DSCR DEBT SERVICE COVERAGE RATIO

DSCR FORMULA:

 

GROSS RENTS ÷ TOTAL HOUSING PAYMENT

Total Housing Payment = PITIA

(Principle + Interest + Property Taxes + Insurance + Association Dues)

Run your own scenarios using our

DSCR CALCULATOR »

✅ HOW TO QUALIFY FOR A DSCR LOAN

To qualify for a DSCR Loan, applicants must have the following:

 

  • DOWN PAYMENT of 15% - 20%. For 2-4 unit multi-family homes, the minimum down payment is 20% - 25%.

  • MINIMUM FICO for a DSCR Loan is 550 or higher. Credit scores < 700 may affect LTV / down payment. (see loan originator for details)

  • PRIMARY HOME EXPERIENCE with a clean, verifiable residency payment history in the most recent 12 months.

NOTE: Renters can qualify on a case-by-case basis as long as there is verifiable 12 month payment history from an institutional landlord. Non-institutional landlords and "living with family" (with or without housing expenses) is prohibited.

  • HAVE 3 OR MORE ACTIVE CREDIT TRADELINES APPEARING ON CREDIT HISTORY FOR THE MOST RECENT 12 MONTHS, *OR* 2 active tradelines for the most recent 24 months.
  • DSCR RATIO - Property being financed must have a sufficient Debt Service Coverage Ratio.* (Minimum 0.75+ ratio for purchase transactions / Minimum 1.00+ ratio for refinance transactions)

* If the property being financed does not have a sufficient DSCR ratio, try our NO RATIO DSCR PROGRAM »

 

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👉 KEY PROGRAM HIGHLIGHTS:

 

  • Ideal for Real Estate Investors looking for an easier way to finance rental properties, without the hard money interest rates and terms.

  • Investment Homes Only - Owner cannot occupy any part of the property

  • Fast Turn-around time: Most DSCR loan programs fund in 3-4 weeks.
  • Take Cash-Out for business and investment purposes

  • No Tax Returns or Personal Income needed to qualify

  • Qualify on the income potential of the property (aka - "DSCR Ratio Formula")

  • Single-Unit Homes and 2-4 Multi-Unit Homes and 5-8+ Unit Properties

  • What Does DSCR Stand for? DSCR stands for Debt Service Coverage Ratio.  See the DSCR FORMULA »
  • NO RATIO DSCR PROGRAM - With this DSCR program, no DSCR Ratio is calculated. This is helpful for quickly acquiring properties with less risk and hassle, and also helpful for properties that currently lack sufficient cash-flow to qualify for a traditional DSCR program.  

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⚙️ What Are DSCR Loans?

🔢 How to Calculate DSCR

A DSCR loan is similar to that of a commercial loan program; however the approach for our residential DSCR program is much simpler, and the documentation and due diligence requirements are significantly easier.

To calculate DSCR, simply take the monthly rental income, and divide by to the full monthly payment on the new loan. (including property taxes, insurance, and any association dues, if applicable)  

EXAMPLE:

Single family home generating $2,250/mo in rental income

New mortgage payment:  $1,800/mo (PITI)

DSCR Ratio: 1.25   ($2,250 ÷ $1,800 = 1.25)

At a Glance

Minimum Down Payment

15% - 20%
 

Minimum Loan Amount

$100,000 per loan

 

Maximum Loan Amount

$4MM

 

Acceptable DSCR Ratio Range

Single Unit and 2-4 Unit residential properties:

As low as 0.75 (purchase transactions)

As low as 1.00 (purchase transactions)

 

NO RATIO DSCR PROGRAM:  No DSCR Ratio is calculated for this program. Get more info on our NO RATIO DSCR PROGRAM »

 

Minimum mid-credit score

550 - Max 50% LTV

600 - Max 60% LTV

620 - Max 70% LTV

660 - Max 80% LTV

740 - Max 85% LTV

 

Loan Repayment Terms

30 years

 

Amortization

30 Year Fixed Rate

 

Prepayment Penalties

Optional, equal to 6 months interest on 80% of the original principal balance.

3 Years, 2 Years, 1 Year, or None (see Loan Originator for Options and Details)

 

5 Year prepayment penalty may apply to all loans where middle credit score < 620

(see Loan Originator for Options and Details)

 

Recent Housing Events

Minimum 36 months waiting period must elapse for prior Bankruptcy 7, Foreclosure, Short Sale or Deed-in-Lieu of Foreclosure
(See Loan Originator for details)

 

Max Seller Contributions

6% of final purchase price

 

Escrows

Escrows for Property Taxes and Home Insurance optional.

 

Occupancy

Investment Purposes Only. Owner may not occupy any part of the property.

 

Acceptable Property Types

Single Family, Townhome/ Villa/ 2-4 Unit Multi-Family/ Condominium/ Condotel or Non-Warrantable Condominium, Manufactured Homes (on a limited basis), 5-8+ Unit Properties, Adult Care Facilities, Commercial Mixed-Use

 

UNACCEPTABLE Property Types

Modular Homes, Mobile Homes, Raw Land, Condotels, Log Homes, Dome Homes, Tiny Homes

👔 CLOSE IN THE NAME OF YOUR BUSINESS ENTITY

We allow you to close in the name of your business entity, such as an LLC, LLP, Corporation, S-Corporation, or LLLP.  This approach can offer significant liability protection and tax advantages for real estate investors.  This is full-recourse lending, meaning that the applicant(s) will personally guarantee the new loan, however it will be recorded on title as the name of your entity. On some of our DSCR programs, we go a step further and do not report the new loan on the applicant's personal credit report.

Your loan originator will review the specific business entity documentation needed at the time of application.

IF YOU ARE PLANNING ON CLOSING IN THE NAME OF YOUR ENTITY, HERE ARE SOME THINGS TO KNOW:

 

  • All Applicants /Guarantors Must Be Entity Members.

  • Single Guarantor Option: A business entity with multiple members can have a single guarantor, provided they are a managing member or a majority owner.

  • Multiple Entity Members Option: If your business entity has multiple members, and you are planning to use only one person to guarantee the loan, be sure to discuss this with your loan originator upfront.

  • Multiple Business Entities: We allow transactions to close in the name of up to two business entities, as long as there is one guarantor who owns 100% of both entities.

💸 GET CASH OUT WITH A DSCR LOAN

DSCR Loans can be a great way to leverage a property for other investments and business endeavors.  You can use the cash to:

 

  • Invest in new properties or other investment opportunities

  • Improve your properties/ improving your cashflow potential

 

FOR CASH OUT, THE FOLLOWING CRITERIA APPLIES FOR SINGLE-UNIT PROPERTIES*:

 

  • Loan Amount Maximum: $4MM
  • Cash in Hand Maximum: $1
  • Minimum DSCR Ratio for Cash Out: 1.00 or higher
    • Maximum LTV:  75% (requires FICO 650 or higher - loan sizes up to $3.5M)
    • Maximum LTV:  70% (requires FICO 625 or higher - loan sizes up to $2M)
    • Maximum LTV:  65% (requires FICO 625 or higher)
    • Maximum LTV: 60% (requires FICO 600 or higher)
    • Maximum LTV: 50% (requires FICO 550 or higher)
  • Occupancy: For 1-4 unit residential properties, all units must be tenant-occupied. Vacant homes are not eligible.

* DSCR Cash-Out Transactions can have multiple overlapping criteria overlays (especially with credit scores lower than 660).

We strongly recommend CALLING US to discuss your scenario with an experienced DSCR Loan Originator.  

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THE "NO RATIO" DSCR LOAN

We offer a true "NO-RATIO" DSCR Program for investment properties where the existing rental income is not calculated towards the standard debt service requirements for a standard DSCR loan.

 

Our NO-RATIO DSCR Program is especially helpful for seasoned investors looking to acquire properties quickly, and can help the investor acquire properties that may not cash-flow at the time of purchase.

 

Our NO-RATIO DSCR Program allows the applicant to bypass the need for income or cash flow verification entirely.  Since there is no DSCR calculation, there is no risk to the applicant that the market rent from the appraisal report will fail to support the new payment.  It short, it removes the biggest risk in any DSCR loan.

 

Our NO-RATIO DSCR Program can be helpful in the following scenarios:

 

  • Investors planning to list the property as a short-term rental (e.g., Airbnb or VRBO) but the property does not yet have a lease or historical income data for the property.
  • The property's projected rental income would cover the mortgage payments, but traditional lenders require established rental history or proof of cash flow.
  • Properties without historical rental income or a tenant lease in place, the investor cannot meet these criteria despite the property's potential

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👉 KEY PROGRAM HIGHLIGHTS FOR OUR NO-RATIO DSCR PROGRAM:

 

  • Max LTV - 75% LTV

  • Terms:  30 Year Fixed-Rate Term

  • Applicant Middle FICO score - 650+

  • Maximum Loan Size: $2MM

  • Eligible properties - Single Unit residential homes, 2-4 Multi-family homes, 5-8+ Unit Properties, Condominiums, Townhomes/ Villas, Mixed-Use Properties.

  • Applicant Experience: First-time buyers are ineligible for investment 1-unit properties

 

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LOAN TERMS & ELIGIBLITY CRITERIA

The loan terms for DSCR Loans are largely determined by the following criteria:

  • Final DSCR Ratio - (how well the property cash-flows) The property being financed must have a sufficient Debt Service Coverage Ratio.*

    • Minimum 0.75+ ratio for purchase transactions

    • Minimum 1.00+ ratio for refinance transactions

  • * If the property being financed does not meet these DSCR ratio, try our NO RATIO DSCR PROGRAM »

  • The applicant's middle FICO score

  • Size of the down payment.

  • Prepayment Penalty (optional) - (See Loan Originator for details) Standard options include: no prepayment penalty, 1 year, 2 year, or 3 year (See Loan Originator for details)  

    • 1-5 Year prepayment penalty may apply to certain scenarios.  See Loan Originator for details)

🏘️🏠 MULTI-UNIT PROPERTIES

We lend on Multi-unit homes, including 2-4 Unit Multi-family homes (duplex, triplex, quadplex).

 

  • FOR 2-4 UNIT HOMES: Maximum LTV 75%, dependent on applicant FICO score.  Minimum DSCR Ratio is 1.00.

  • FOR 5-8+ UNIT PROPERTIES - Maximum 75% with FICO 650 or higher. These properties are qualified on a per-transaction basis. Contact us to discuss project details.  

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DEALING WITH SURPRISES IN THE LOAN PROCESS

During the DSCR loan process, there can sometimes be unexpected challenges that arise.  the majority of these challenges tend to involve the amount of rental income that comes back in the Market Rental Analysis Report.

Sometimes these values come in lower than investors project, resulting in a DSCR ratio being lower than the minimum needed to qualify for the new loan.  

If this happens, you may be able to switch to our No Ratio DSCR option, which does not use the DSCR ratio to qualify.  

Or, you can try these tips for raising your DSCR Ratio »

TIPS FOR RAISING YOUR DSCR RATIO

If your DSCR is too low to qualify for a DSCR Loan, here are a few tips for raising your DSCR Ratio. If this doesn't work, ask your loan originator about our No Ratio DSCR option.

  • Increase your down payment

  • Reduce the coverage of your insurance policy, which may reduce your premium.

  • Buy additional discount points to decrease the interest rate on your loan.

  • Ask the seller for a closing cost credit.  Our DSCR programs allow up to 4% seller credits

  • Renegotiate the contract price of the home to meet the debt service requirements.

HAVE A QUESTION?

GET PRE-APPROVED FOR THIS PROGRAM TODAY »

CALL TODAY:
(813) 928-9610

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HAVE A QUESTION? MESSAGE US TODAY  »

This is not a commitment to lend.  Not all borrowers will qualify for the loan programs listed.  All program terms and conditions are subject to change and may be discontinued without prior notice. Contact loan originator for program questions and scenarios.