What is a DSCR loan and how does it work?

A DSCR loan is a type of investment loan where approval is based primarily on the property’s cash flow, not the borrower’s personal income. Lenders evaluate whether the rent from the property can cover the mortgage payment.

What DSCR ratio do lenders typically require?

Most lenders require a DCSR of 1.0-1.25, meaning the property must generate at least 100-125% of the monthly debt obligation. We have lenders that allow lower DSCR ratios (even below 1.0) but rates may be higher as well as the required down payment.

What credit score is needed for a DSCR loan?

Typically, a minimum credit score of 620-680 is required for these types of loans. Higher scores usually mean better interest rates and lower down payments.

How much down payment is required for a DSCR loan?

Down payments usually range from 20-25%. Lenders may allow lower down payments for strong DSCR ratios, credit or high amount of reserves.

What properties qualify for a DSCR loan?

Most DSCR lenders finance Single family homes, 2-4 unit homes, Condos and townhomes as well as 5+ Multifamily buildings.