What are the requirements for a DSCR loan?
The short answer
Most DSCR loans look for four things: rent that covers the full monthly payment, about 20% to 25% down, a credit score around 660 or higher, and a few months of payments saved in reserves. There are no personal tax returns or pay stubs. The Mortgage Advisory is the direct lender on DSCR loans in California, Texas, and Colorado (in Florida, we arrange them as a licensed mortgage broker), so we can tell you exactly where you stand before a hard credit pull.
What do DSCR lenders actually check?
Instead of your job and tax returns, a DSCR loan looks at the property and your track record with money:
| What we check | What most programs look for |
|---|---|
| The ratio (DSCR) | Rent at or above the full monthly payment (a ratio of 1.0 or higher). Some programs go lower with more down. |
| Down payment | About 20% to 25% on a purchase |
| Credit score | Many programs start around 660; better pricing usually starts in the 700s |
| Reserves | Usually 3 to 12 months of the property's payment in the bank after closing |
| Property | A rental: single-family, 2 to 4 units, condos, and townhomes |
What don't you need?
- No personal tax returns, W-2s, or pay stubs
- No debt-to-income ratio on your personal income
- No employment verification
That's why DSCR loans work so well for self-employed investors and people with a lot of write-offs.
What can't a DSCR loan be used for?
It's for investment properties only. You can't use it for the home you live in, a second home you use yourself, or a property you're flipping in a few months.
Example (illustrative)
A nurse in Riverside owns one rental and wants a second. Her income is fine, but her debt-to-income is maxed out from her first rental and her own home. On a DSCR loan, the new property's $2,400 rent covers its $2,250 payment, she has 25% down and six months of reserves, and her personal debt-to-income never comes into it.
Our take
Requirements vary from program to program, and that's where we earn our keep. Tell me your credit, cash, and the property, and I'll tell you which programs fit before we ever pull credit.
Ace Ausar, Mortgage Banker · NMLS #1143018
The Mortgage Advisory, Inc. · NMLS #1549739
Reviewed by Ace Ausar, NMLS #1143018 · Updated
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