DSCR investment
A debt service coverage ratio loan qualifies the property, not the person. No tax returns, no personal debt-to-income calculation. The test is whether the rent covers the principal, interest, taxes, insurance and any association dues.
- Qualifying test
- Rent divided by full housing payment
- Typical minimum ratio
- 1.00 for best pricing, down to 0.75 with more equity
- Down payment
- 20% to 25% typical
What this program actually is
The ratio is simple: gross monthly rent divided by the full monthly housing payment. A ratio of 1.00 means the rent exactly covers the payment. Most investors on our panel want 1.00 or better for their best pricing, several will go down to 0.75 with a larger down payment, and a few will lend on a ratio below that at investor-specific terms.
Rent is established by the appraiser's comparable rent schedule, not by your optimism. If you are buying a University area duplex with one unit vacant, the market rent on that unit comes from the appraisal, which is why we ask for the rent roll and lease copies early.
Almost every DSCR loan carries a prepayment penalty, usually a step-down over three to five years, occasionally with a buyout option. We put that structure on the comparison sheet in plain English because it is the term most likely to cost you money later.
- Qualifying test
- Rent divided by full housing payment
- Typical minimum ratio
- 1.00 for best pricing, down to 0.75 with more equity
- Down payment
- 20% to 25% typical
- Entity vesting
- LLC vesting allowed by most panel investors
- Prepayment penalty
- Common, usually a 3 to 5 year step-down
What you get from us on this program
- A ratio calculation on the address before you make an offer
- Rent comparison against the appraiser's likely comparable rent schedule
- Prepayment penalty structures compared in plain English, including buyout cost
- LLC vesting handled, including operating agreement requirements
- Portfolio planning if you intend to buy more than one this year
How the file runs
- 01
Ratio check
Send the address and expected rent, and we return the ratio and likely pricing tier.
- 02
Structure choice
Down payment, term and prepayment penalty traded against each other in writing.
- 03
Investor selection
Chosen for ratio tolerance and vesting rules, not headline rate alone.
- 04
Appraisal with rent schedule
Ordered with the comparable rent form so nothing is missing.
- 05
Close in your entity
Title, insurance and vesting coordinated so your LLC is on the deed correctly.
What moves your pricing on this program
These are the inputs an underwriter and a rate sheet actually react to. Nothing on this page is a quote.
| Factor | Why it matters |
|---|---|
| Debt service coverage ratio | The primary pricing input |
| Property type | Single family, 2 to 4 unit and short-term rental price differently |
| Experience | First-time investors face tighter terms with some investors |
| Credit | Tiers step at 680, 700, 720 and 740 |
| Prepayment structure | A shorter penalty period usually costs rate |
All rates, APRs, payments, fees and timelines referenced on this site are sample figures for illustration only. They are not an offer of credit and not a commitment to lend. Equal Housing Opportunity.
Often compared with
Bank statement (self-employed)
Qualify on 12 or 24 months of business deposits instead of tax returns.
Compare
Jumbo and high balance
Above the county conforming limit, with a different underwriting culture.
Compare
Conventional conforming
Agency financing from 3% down with mortgage insurance you can remove.
Compare
DSCR investment questions
Not covered here? Call (505) 555-0135 or send us a note. Se habla español.
Two investors on our panel will use a projection from a recognized market data source. The rest require twelve months of history on that specific property.
No. DSCR loans do not use personal debt-to-income at all, which is what makes them useful once you own several properties.
Yes with most panel investors, provided the entity is in good standing and the operating agreement names the guarantors.