How to Qualify For A DSCR Loan
It's easy! A debt service coverage ratio loan or DSCR loan for short is based on the premise that the rental income on the investment property you want to purchase will cover the loan payment or PITIA. This is a no income verification mortgage; you don't need to show your tax returns, W-2s, or pay stubs!
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PITIA Definition
(P) Principal: The money you pay back to lower your loan.
(I) Interest: The fee the lender charges you to borrow the money.
(T) Taxes: The property taxes you pay to local governments.
(I) Insurance: Homeowner, flood, or mortgage insurance that protects the property.
(A) Association dues: Fees for your neighborhood or condo group, if you have one.
How much can I finance with a DSCR loan?
Finance up to 80% of the purchase price
Minimum DSCR 1.0
Minimum credit score 680
No deferred maintenance
Market rent will be used for vacant units
Minimum loan amount >$75K
30-Year fixed rate
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What is the minimum loan amount for a DSCR loan?
$50,000 is the minimum loan amount for a DSCR. (Lower with exception).
Alternatively, you can finance up to 85% of the purchase price of the property, if...
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The property is a single family home, condo, townhome or 2-4 units
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Your credit score is >720
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You have owned two or more rental properties for 24 months
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The DSCR is >1.35
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Loan is >$100K
You can finance up to 90% of the purchase price of the property, if ...
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The seller (or anyone for that matter) is willing to finance a 2nd position lien for a minimum of 3 years for up to 45% of the value of the property. You would be required put down a minimum of 10% plus closing fees.
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The property is a single family home, condo, townhome or 2-4 units
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Loan is > $75K
DSCR Formula Calculation
DSCR =
Net Operating Income
Principal, interest, taxes, insurance & association fees (if applicable)
Total Debt Service 'PITIA'
What is the minimum DSCR ratio lenders accept?
We typically look for a ratio of 1.0 to 1.25 (meaning the rent fully covers or exceeds the monthly mortgage). Although, we can offer "no-ratio" or low-ratio loans (<1.0), but these come with higher interest rates and larger down payments.
What types of properties qualify for DSCR loans?
You can use a Debt Service Coverage Ratio (DSCR) loan to finance a wide variety of investment properties, including:
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Residential: Single-family homes, 2–4 unit properties, warrantable & non-warrantable townhouses and condos.
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Multi-Family & Commercial: 5+ unit multi-family buildings, mixed-use properties, and commercial real estate.
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Specialty & Vacation: Condotels, mobile / manufactured homes and short-term (Airbnb/VRBO) rentals.
How do you determine market rent if the home is vacant or a short-term Airbnb rental?
We typically rely on an appraisal report that includes a market rent schedule (Form 1007). For short-term rentals, we use AirDNA estimates or historical platform earnings instead of long-term lease rates.
How do DSCR lenders calculate income when actual rent exceeds market rent?
It is typical to use the lower of actual rent or market rent, but we're not typical! If you have your property leased for an amount that is higher than the 1007 report, we will accept the HIGHER lease with a copy of your lease and documented security deposit and 1st months rent payment.
5+ Multi-Family & Mixed-Use
Starting at $100K
Up to 75% LTV
Minimum credit score 650
Must be 70% occupied
No deferred maintenance
What is the minimum credit score I need to qualify for a DSCR loan?
We typically ask for a score of 600 to 680+, though higher credit scores unlock significantly better rates and terms. Lower scores don't automatically disqualify you from getting a loan. With no credit you can still get 50% LTV!
Which Commercial Property Types Qualify For DSCR Loans?
5+ Multi-Family
Owner & Non Owner
Auto service
Bed & breakfast
Assisted living
Campground / RV park
Car wash
Entertainment & recreational
Healthcare / medical
Hospitality (hotels & motels)
Industrial
Mixed-use
Mobile home park
Office
Restaurant
Retail
Self-storage
Warehouse
Other specialty properties
Commercial DSCR Loans Starting at $100K
No minimum credit score
No deferred maintenance
30-Year fixed rate