Can I get a DSCR loan if the rent doesn't cover the payment?
The short answer
Sometimes. Some DSCR programs accept a ratio under 1.0, meaning the rent covers only part of the payment, and a few no-ratio programs skip the calculation entirely. Expect a bigger down payment, stronger credit, more reserves, and a higher rate. The Mortgage Advisory will show you whether a lower-ratio program or a different structure gets the property to cash-flow.
What are the options when the ratio is under 1.0?
- Lower-ratio programs: some accept a ratio around 0.75 to 0.99, usually with 25% to 30% down and strong credit
- No-ratio programs: a few skip the rent test, typically with the largest down payments and higher rates
- Change the numbers: more down, a rate buy-down, cheaper insurance, or interest-only can push the ratio over 1.0
Why would anyone buy a property that doesn't cash-flow?
Some investors buy in high-appreciation areas, plan to raise rents, or are renovating to increase the rent. That can work, but you're covering the shortfall every month out of pocket, so have a plan and reserves.
Example (illustrative)
An investor in Irvine finds a condo with $3,100 rent and a $3,500 payment, a ratio of 0.89. A lower-ratio program works with 30% down. He also shops the insurance and buys down the rate, which brings the payment to $3,250 and the ratio to 0.95. He knows he'll cover about $150 a month until the rent rises.
Our take
I'll tell you straight when a property doesn't cash-flow. Sometimes the right move is a bigger down payment; sometimes it's a different property. Either way, you'll see the monthly shortfall in real dollars before you commit.
Ace Ausar, Mortgage Banker · NMLS #1143018
The Mortgage Advisory, Inc. · NMLS #1549739
Reviewed by Ace Ausar, NMLS #1143018 · Updated
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