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DSCR Loans for Investors
What is a DSCR Loan?
Our DSCR Loan Program, Simplified
How It Works:
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How We Qualify the Loan
For example:
DSCR financing
Short-term rentals (STRs), often called vacation rentals, are homes rented out for short stays, from one night to a month.
They’re great for real estate investors because of their earning potential and flexibility. You, as the owner, can choose exactly when to rent out your property, be it nightly, weekly, or monthly.
Long-term rentals are properties that are purchased and rented out for long-term leases.
An LTR property can range from a single-family home, townhouse, multi-family home, apartment or condo and is associated with providing tenants accommodation for an extended period; generally, a minimum duration of six months or greater.
A multi-family property, or multi-dwelling unit (MDU), is a residential building with more than one rentable space. The most common examples are duplexes, triplexes, and quadplexes.
Multi-family investments allow for the acquirement of multiple properties within one building and are the epitome of scalability. They are the perfect wealth-building tool for those looking to expand their real estate investment portfolio.
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Frequently Asked Questions
A DSCR (Debt Service Coverage Ratio) loan is an investment property financing option that qualifies you based on the property's rental income rather than your personal income. Unlike traditional mortgages that require extensive documentation of your employment and finances, DSCR loans focus solely on whether the rental income can cover the mortgage payment. The ratio is calculated by dividing the monthly rental income by the total monthly debt obligations (principal, interest, taxes, insurance, and HOA fees). A ratio of 1.0 or higher indicates the property generates enough income to cover its expenses, making it suitable for investors with complex tax situations or multiple income streams.
Most DSCR loan programs require a minimum ratio between 0.75 and 1.0, varying by lender. A DSCR of 1.0 means the property's rental income covers the debt obligations (break-even). A ratio above 1.0 indicates positive cash flow, which lenders prefer. Many offer their best rates and terms for properties with a DSCR of 1.25 or higher. Some programs accept ratios as low as 0.75 but require larger down payments (25-30%), higher credit scores, and substantial cash reserves. The lower your DSCR, the more compensating factors you'll need to demonstrate financial strength.
Yes, you can use projected rental income for DSCR loans, making them ideal for purchasing unrented properties. Lenders typically use two methods to determine rental income: an actual lease agreement for occupied ones, or a rent schedule/appraisal with a market rent analysis for vacant properties. Some lenders accept a comparable rent analysis or 1007 rent schedule form. This flexibility allows you to purchase fix-and-flip, vacant, or new construction properties for rental purposes without needing an existing tenant.
DSCR loans are portfolio products, meaning they're not bound by conventional loan limits. Most lenders offer them from $75,000 to $3 million or more, depending on the lender and your qualifications. Unlike conventional loans which have county-specific limits, they can finance higher-value investment properties in expensive markets. Some specialty lenders offer DSCR loans up to $5 million for experienced investors with strong profiles. The maximum amount depends on your credit score, down payment, cash reserves, the property's DSCR ratio, and your investment experience.
DSCR loans can finance various investment properties including single-family homes, condos, townhomes, 2-4 unit multi-family, and sometimes larger buildings. Both long-term and short-term rentals qualify. The property must be non-owner occupied and for investment purposes. Some lenders restrict certain types like co-ops, rural properties, or those needing significant rehabilitation. Warrantable condos in established projects are acceptable, while non-warrantable may have additional requirements.
Lake Forest, CA 92630, NMLS#133519