What it is.
Business-purpose financing for a non-owner-occupied rental property. Debt service coverage ratio (DSCR) compares the property’s qualifying rent with its qualifying monthly payment, instead of using a standard personal-income debt-to-income calculation.
Purchase, rate-and-term refinance, and business-purpose cash-out options are available. The reviewed options include loans up to $2 million, with selected larger-loan programs reaching $4.5 million under stricter requirements. Maximums cannot be combined across programs.
Conventional first. DSCR when it fits.
Before recommending DSCR, we explore whether conventional financing makes more sense. That includes taking the time to understand your tax returns and qualifying income. A complicated income picture should not automatically push you into a different loan program.
A similar rate does not always mean similar terms. A DSCR quote may include a prepayment penalty to achieve that rate. Simpler documentation alone is not a reason to choose it. We compare rates, points, closing costs, and the cost of selling or refinancing early before recommending a program.
Compare quotes with clear assumptions.
Our starting point: 20% down and a 1.00 DSCR, with a conversation about prepayment penalties first. We ask how long you expect to keep the loan and which prepayment terms, if any, you would accept. This is a comparison baseline, subject to lender eligibility—not an assumption that every property qualifies.
Pricing may improve with a stronger DSCR, such as 1.25 or higher, with discount points paid upfront, or with a prepayment penalty. When shopping, ask what rental coverage, down payment, points, and penalty were used in the quote. An attractive rate based on best-case assumptions may not match your property or the terms you are comfortable accepting.
Get qualified first. Then shape your offer.
Start with the down payment you have available. We review your qualifications and available funds, allow for closing costs and required reserves, and estimate a purchase-price range using likely financing terms and rental-income assumptions. Before you make an offer, we compare that property’s expected qualifying rent with its projected payment and help you shape the offer around those numbers.
Making an offer before checking the financing can lead to an unwelcome surprise: substantially more money down than expected, or a mortgage payment the rent does not cover. A lower purchase price, more money down, or a different loan option may be needed. A higher rate also raises the qualifying payment and can reduce DSCR.
Some options allow as little as 15% down, but pricing reflects the higher leverage. These are additional options beyond the example matrices summarized here. The property, credit profile, rental coverage, and other lender requirements must qualify. Do not assume the lowest down payment comes with the lowest rate.
Below-1.00 DSCR can be a fallback, not a substitute for planning. Options down to 0.75 may help when rent falls short, but pricing and down-payment requirements can change. Compare that option with a lower offer price or more money down before deciding.
We can review your buying parameters before you shop. Final approval and pricing still depend on the selected property, verified rental income, appraisal, and lender review; an early estimate does not lock a rate.
How it works.
Start with qualifying rent. The lender determines which lease, appraised market rent, or eligible short-term rental history can be used. Purchase and refinance calculations can differ.
Compare rent with the qualifying payment. This generally includes principal, interest, taxes, insurance, and association dues (PITIA). Eligible interest-only options use the lender’s interest-only calculation. For example, $2,400 in qualifying rent divided by a $2,000 qualifying payment equals a 1.20 DSCR.
Below 1.00 does not always mean no. A ratio of 1.00 means qualifying rent equals the qualifying payment. Some reviewed options allow ratios as low as 0.75, with different credit, down-payment, and loan-size limits. Short-term rental and larger-loan options can require higher ratios.
The advertised maximum LTV is a best-case ceiling. Your required down-payment percentage depends in part on whether the property meets the lender’s DSCR requirement at the proposed price and rate. Some additional options allow up to 85% loan-to-value (15% down), with pricing reflecting the higher leverage. The reviewed example matrices generally top out at 80% purchase LTV. Rent, credit, reserves, loan size, and property restrictions may require a smaller loan and more money down. DSCR does not measure every operating expense or guarantee a profitable investment.
Credit scores can start at 640 on a reviewed option. Other reviewed options start at 660 or higher, and the required score depends on DSCR, loan amount, property, and transaction. A 640 score does not qualify for the maximum LTV: the reviewed 640-score purchase tier allows up to 75% LTV (25% down) at DSCR of at least 1.00, with lower limits below 1.00. The lowest score and lowest down payment are not necessarily available together.
Then we verify the rest of the file. Credit, housing history, assets, reserves, appraisal, rental documentation, property eligibility, and the business purpose still require review. DSCR is a different way to qualify—not a no-documentation loan.
