Up to 80% LTV · 1.05x DSCR · 660 FICO
DSCR loans for 1-4 unit rentals
A 30-year loan sized on what the property rents for, not on your tax returns. If the rent covers the payment 1.05 times, the deal works.
DSCR rental loan terms
| Use | Purchase, rate-and-term refinance or cash-out refinance of one rental property (1-4 units) |
|---|---|
| Property types | Single family, 2-4 units, townhomes, PUDs, warrantable condos |
| Loan amount | $75,000 to $2,000,000 |
| Term | 30 years |
| Rate options | 30-year fixed (fully amortizing or partial interest-only); 5/6, 7/6 and 10/6 ARMs |
| Leverage | Up to 80% LTV on a purchase or rate-and-term refinance; up to 75% on cash-out |
| Owned under 3 months | Loan sized on cost: up to 80% of total cost basis. Value is used after 90 days of seasoning |
| Minimum DSCR | 1.05x (gross rent divided by PITIA) |
| Rent the lender uses | Leased units: the lower of the lease and market rent. Vacant units: 90% of market rent |
| Vacancy | A purchase can be vacant; on a 2-4 unit refinance one unit can be vacant |
| Minimum FICO | 660 |
| Income documents | No W-2s, pay stubs or tax returns |
| Experience | Not required |
| Borrower | Business entity (LLC or corporation); full recourse |
| Foreign nationals | Eligible, up to 65% LTV |
| Not eligible | Rural properties |
| Points, prepayment terms, reserves | Not published; quoted per loan. Zero-point options are offered |
How the lender sizes a DSCR loan
DSCR stands for debt service coverage ratio. On a 1-4 unit rental the lender divides the monthly rent by the full monthly payment: principal, interest, property taxes, insurance and any HOA dues (PITIA). A $2,600 rent against a $2,300 PITIA is 1.13x.
Two limits apply at once, and the lower one wins. The loan can be up to 80% of the price on a purchase. It also has to keep the ratio at 1.05x or better. In expensive-tax or high-insurance markets the ratio usually binds first, which is why two investors buying at the same price can walk away with different loans.
Worked example. A duplex at $325,000 renting for $2,650 a month, $4,200 a year in taxes and $1,900 in insurance. At 75% LTV and an assumed 7.25% rate (an example, not a quote), the loan is $243,750, the PITIA is $2,171 and the ratio is 1.22x. The rent would support a loan of about $295,000 at 1.05x, more than the $260,000 that 80% LTV allows, so here the LTV cap is the real ceiling.
Rates on these loans move with the 5- and 10-year Treasury; see today's market numbers. To see where typical rents clear 1.05x, check rental math by metro, and for the full picture after vacancy and repairs use the rental property calculator. Comparing lenders? See how other lenders' DSCR terms compare.
What you need to close
- A credit score of 660 or higher (680 for a portfolio loan)
- An LLC or corporation to borrow in, with you as guarantor
- Leases for any rented units; the appraisal sets market rent
- Bank statements for the down payment, closing costs and reserves
- Insurance quote naming the lender, and flood insurance if the map requires it
No W-2s, pay stubs or tax returns. No minimum number of properties owned. First-time investors are eligible.
Fixed or adjustable
The 30-year fixed is the default for a long hold. The 5/6, 7/6 and 10/6 ARMs hold a fixed rate for 5, 7 or 10 years and then adjust every six months. They tend to price lower at the start, so they suit an investor who expects to sell or refinance inside the fixed window. Partial interest-only is available on both, which lowers the payment in the early years and lifts the ratio.
Most DSCR loans carry a prepayment penalty that steps down over the first few years. The prepayment penalty calculator shows what it would cost in the year you expect to sell or refinance.
What is not eligible
Rural properties, homes you or your family will live in, and properties in North Dakota, South Dakota or Vermont. Short-term and vacation rentals are worth asking about before you go under contract; the portfolio loan excludes them outright. Five units and up is a commercial multifamily loan, which we handle separately.
Run your numbers
Clears 1.05x minimum
Debt service coverage
1.22x
Rent of $2,650 covers the $2,171 monthly payment 1.22x. The program minimum is 1.05x.
- Loan amount
- $243,750
- Principal and interest
- $1,663
- Taxes, insurance, HOA
- $508
- PITIA per month
- $2,171
- Largest loan at 1.05x
- $295,448
- Rent needed at 1.05x
- $2,280
- Rent minus PITIA
- $479
Lender's DSCR: monthly rent divided by principal, interest, taxes, insurance and association dues (PITIA). Before vacancy, repairs and management.
Questions people ask
What DSCR do I need?
At least 1.05x on this program. That means the monthly rent has to be at least 5% more than the monthly principal, interest, taxes, insurance and HOA dues. A $2,000 PITIA needs $2,100 of rent the lender will count.
Which rent does the lender use?
For a leased unit, the lower of the lease and the appraiser's market rent. For a vacant unit, 90% of market rent. So an above-market lease does not help you, and a vacant purchase is sized a little below market.
Do I need tax returns or W-2s?
No. The loan is qualified on the property's rent and your credit, not your personal income. You still need a credit score of 660 or higher, bank statements showing the down payment and reserves, and an LLC or corporation to borrow in.
Can I take cash out?
Yes, up to 75% of the appraised value. If you have owned the property less than 3 months, the loan is sized on what you paid plus documented improvements (up to 80% of that cost) instead of the new appraisal.
Is there a limit on how many rentals I can own?
Not on this program. Conventional loans stop at 10 financed properties; a DSCR loan does not count your other mortgages that way.
Can I close in my own name?
No. The borrower has to be a business entity, usually an LLC, and you sign a personal guarantee. If the property is in your name today, you can deed it to the LLC at or before closing.
Have a deal under contract?
Send the numbers. We will tell you plainly whether it fits and what the loan looks like.