DSCR loan FAQ

A DSCR loan is a mortgage for a rental property that is approved mainly on what the property earns. DSCR stands for debt service coverage ratio. The lender takes the monthly rent, divides it by the property's full monthly payment (principal, interest, taxes, insurance and any association dues, known as PITIA), and checks whether the answer clears the program's minimum. Your paychecks and tax returns are not part of the decision, which is why self-employed buyers, owners of several rentals and first-time investors use these loans.

No. DSCR loans qualify on the property's rental income instead of personal income documents, so tax returns, W-2s and pay stubs are not the basis for approval. The loan is underwritten on the property's rent compared with its payment. You will still provide credit, identification, proof of the cash you are putting in, and documents about the property and the rent.

Yes, where lender guidelines allow it. Depending on the program, lenders in our network accept first-time investors with no landlord history. Expect leverage of up to about 80%, a credit score starting near 680, a ratio of 1.0 or better and extra reserves compared with an experienced investor. Depending on the lender, programs also look for a year of owning your own home. Read the first-time investor guide.

It narrows the field, but it is not always a dead end. Many first-time investor programs ask that you have owned a primary residence for a period, and depending on the program, lenders say first-time homebuyers are not eligible at all. A smaller number of programs do accept someone who has never owned. Tell us your situation at the start so your file goes only to lenders that can say yes.

A ratio of 1.0 or higher, meaning the rent at least covers the payment, opens the widest set of programs. Depending on the lender, programs go lower, down to about 0.75, and separate no-ratio options exist. Lower ratios usually come with more cash down, more reserves or different pricing. Details are on our below 1.0 and no-ratio page.

Minimums start at about 600 where lender guidelines allow it, and plenty of programs start between 620 and 680. First-time investor programs commonly start near 680. Higher scores usually mean more leverage, fewer reserves and better pricing. See DSCR loan requirements for the full picture.

Plan on a down payment of 20% to 25% for a typical purchase, plus closing costs and reserves. Depending on the lender, programs reach 85% loan-to-value for strong files, so the down payment can be as low as 15%, and first-time investors are more often capped near 80%. Short-term rentals, condos, 5 to 8 unit buildings and ratios under 1.0 usually need more.

Reserves are liquid funds left in your accounts after closing, counted as months of PITIA. Requirements run from none where lender guidelines allow it to about six months, with more on first-time investor, foreign national, large-loan and low-ratio files. Depending on the lender, programs let cash-out proceeds count toward reserves.

They sit in the payment side of the formula. Higher property taxes or a costly insurance policy lower the ratio even if the rent stays the same, which is why a quote for insurance (including flood where it applies) belongs in your numbers before you make an offer.

The appraiser prepares a market rent schedule, and the lender uses that number. When there is a lease, depending on the lender, programs use the lease or the lower of the lease and the appraised market rent. Depending on the lender, programs accept a lease above market once you can show the payments were received.

It confirms the value and, importantly, the market rent. The appraiser's rent schedule is often the number the lender uses, so a purchase offer is best written with a realistic rent in mind. Keep in mind the appraisal also checks that the property is in rentable condition.

Depending on the lender, programs allow it, usually with a personal guarantee from the owners, and a few accept other entities or trusts. Entity paperwork such as the operating agreement, EIN letter and a good standing certificate is normal. Ask your own attorney how to structure ownership. We cover the lender side on the LLC page.

Depending on the lender, DSCR programs do not cap the number of financed properties the way conventional guidelines do, though a lender may set an exposure limit or ask for more reserves on larger portfolios. We match the plan to a program that fits.

Where lender guidelines allow it, yes. Lenders usually want twelve months of platform history, or a third-party income projection for a property you are just buying, and may reduce the income by an expense factor. Others only use long-term market rent. Start with the short-term rental page.

Depending on the lender, programs offer interest-only periods, often ten years, and several qualify the ratio on the lower interest-only payment, which raises the ratio on the same rent. After the interest-only period the loan amortizes. Read more on the interest-only page.

Yes. Cash-out refinances are available where lender guidelines allow it, with lower maximum leverage than a purchase, commonly 65% to 75% and up to 80% where lender guidelines allow it. Rules on how long you must have owned the property vary, and depending on the lender, programs allow a refinance soon after an all-cash purchase. See DSCR cash-out refinance.

Depending on the lender, programs approve ratios below 1.0, down to about 0.75, and separate no-ratio loans exist where the rent does not have to cover the payment. Those loans usually need a lower loan-to-value, stronger credit or more reserves. You can also change the numbers: more cash down, a lower insurance quote or an interest-only payment.

Depending on the lender, programs lend to foreign nationals, commonly up to about 70% to 75% loan-to-value with a U.S. LLC, a valid passport and larger reserves, and some do not require a U.S. credit score. Programs and documents vary a lot, so see the foreign national page.

Depending on the lender, programs finance 5 to 8 unit residential properties, commonly up to about 75% loan-to-value, and they usually want an experienced investor on the loan. Details on the 5 to 8 unit page.

DSCR loans expect a property in rentable condition. A home that needs major repairs is usually bought with other financing first and refinanced into a DSCR loan once it is rented or rent-ready. Ask us about your plan.

Many DSCR loans have one, usually a declining percentage over several years, and you can often choose a longer penalty for a lower rate or a shorter one for a higher rate. Some states or lenders restrict them. Ask for the schedule in writing before you lock, and match it to how long you plan to hold.

Many DSCR loans close in roughly three to five weeks, depending on the appraisal, title work, entity paperwork and how quickly documents arrive. We cannot promise a date, but we work backward from your contract deadline.

Pricing depends on the credit score, loan-to-value, ratio, loan amount, property type, prepayment penalty and lender, and it changes often. A single posted number would not describe your deal. Ask for a quote on your scenario and compare the full cost, not only the rate.

No. A quote is free and does not require a credit pull to start. Third-party costs such as the appraisal and title charges apply only if you go forward with a loan.

1st Advantage Mortgage is a mortgage broker and lender based in Charlotte, NC. On DSCR files we compare several specialist wholesale lenders, then show you the options side by side, instead of fitting you to a single lender's menu.

This site covers the states listed on our state page index, and it grows as we confirm more. DSCR availability varies by state and by property, and a listing here is not an offer to lend. North Carolina and South Carolina each have their own page.

Yes. Both states have a full page here, North Carolina and South Carolina, with local metros, cost notes and investor questions. Our office is in Charlotte, so Carolina files are close to home.

No. DSCR loans are business-purpose loans on investment property you do not occupy. If you want to live in the property, ask about owner-occupied programs instead.

No. Nothing on this site is a commitment to lend. Loans are subject to credit approval, appraisal and program eligibility, and terms can change without notice.