Qualify on Cash Flow
Based on property rental income, not personal W-2s
No Income Documentation
Non-QM DSCR options available
Multiple Properties
Finance portfolios of investment properties
What is a DSCR Loan?
A DSCR (Debt Service Coverage Ratio) loan is an investment property mortgage that qualifies based on the property's rental income rather than the borrower's personal income. This makes DSCR loans perfect for real estate investors in Texas who want to build investment portfolios without relying on their W-2 income to qualify.
DSCR Loan Benefits
- Qualify on Property Cash Flow: Approval based on rental income, not personal W-2 income
- Non-QM Options: No personal income documentation required for select programs
- Multiple Property Portfolios: Finance entire rental property portfolios
- Various Property Types: Single-family rentals, multi-unit, commercial, mixed-use
- Interest-Only Options: Lower payments during lease-up periods
- Flexible Terms: 1/1 ARM to fixed-rate 30-year options
Understanding DSCR (Debt Service Coverage Ratio)
Your DSCR is calculated by dividing the property's Net Operating Income (NOI) by your total monthly debt service (the loan payment). Here's what different ratios mean:
DSCR 1.25 - 1.5
Ideal ratio. Rental income covers 125-150% of loan payment. Lenders prefer this.
DSCR 1.0 - 1.25
Good ratio. Rental income covers 100-125% of loan payment. Most common.
DSCR 0.75 - 1.0
Acceptable for some programs. Rental income covers 75-100% of payment.
DSCR Below 0.75
Challenging. Limited programs available. Higher rates.
DSCR Loan Requirements
Credit & Reserves
- Minimum 620 credit score (700+ preferred)
- 6-12 months reserves required
- Limited cash-on-hand from all sources
- No recent bankruptcies or foreclosures
Property & Down Payment
- 10-25% down payment typical
- Current or projected rental income
- Lease agreements or market analysis
- Property appraisal required
Types of Properties That Qualify
Single-Family Rentals
Your first investment property or add to an existing portfolio.
Multi-Unit Properties
Duplexes, triplexes, four-plexes, and apartment buildings with multiple units.
Commercial Real Estate
Office buildings, retail properties, industrial warehouses.
Mixed-Use Properties
Combination commercial/residential properties.
DSCR vs. Traditional Investment Loans
| Feature | DSCR Loan | Conventional Investment |
|---|---|---|
| Qualification | Property cash flow | Personal W-2 income |
| Income Docs | Lease/market analysis | 2 years tax returns |
| Credit Score | 620+ (sometimes lower) | 680+ |
| Down Payment | 10-25% | 20-25% |
Frequently Asked Questions
What is a DSCR loan?
A DSCR (Debt Service Coverage Ratio) loan is an investment property mortgage that qualifies based on the property's rental income rather than the borrower's personal income. Perfect for real estate investors.
What is Debt Service Coverage Ratio?
DSCR is calculated by dividing the property's net operating income by the total debt service (mortgage payment). A DSCR of 1.0 means rent covers 100% of the loan payment. Most lenders require 0.75-1.25 DSCR.
Can I get a DSCR loan with no personal income documentation?
Yes! Non-QM DSCR loans don't require personal income documentation. We qualify based on the investment property's potential or current rental income.
What properties qualify for DSCR loans?
Single-family rentals, duplexes, triplexes, four-plexes, multi-unit apartment buildings, commercial properties, and mixed-use properties all qualify for DSCR financing.
Ready to Grow Your Rental Property Portfolio?
Ken Harmon specializes in DSCR financing for Texas real estate investors. Whether you're buying your first rental or expanding an existing portfolio, we have solutions designed for you.
Call to Discuss DSCR Options →Ready to Get Pre-Approved for a DSCR Loan?
Call Ken Harmon today for investment property financing in Texas
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