Mortgage questions, answered
Real questions borrowers ask, answered simply and clearly by The Mortgage Advisory, a mortgage lender and broker licensed in California, Texas, Florida, and Colorado (NMLS #1549739).
17 answers in Investors & DSCR
Clear searchCan I do a cash-out refinance on a rental with a DSCR loan?
Yes. A DSCR cash-out refinance lets you pull equity out of a rental using the property's rent to qualify, with no personal tax returns. Many programs allow cash-out up to about 70% to 75% of the property's value, and the cash can fund your next down payment. The Mortgage Advisory will show you how much you can take out and how the new payment affects the ratio.
Can I use a DSCR loan for a duplex, triplex, or fourplex?
Yes. DSCR loans work on duplexes, triplexes, and fourplexes, and the ratio uses the total rent from all the units. Expect a down payment of about 25% on most 2 to 4 unit programs. Properties with five or more units usually need a commercial or multifamily loan instead. The Mortgage Advisory finances 2 to 4 unit rentals and can point you in the right direction for larger buildings.
What credit score do I need for a DSCR loan?
Many DSCR programs start around a 660 credit score, and some accept scores in the low 600s with a bigger down payment and a higher rate. The best pricing usually starts in the 700s. The Mortgage Advisory can tell you which programs fit your score with a soft look first, before any hard credit pull.
What documents do I need for a DSCR loan?
A DSCR loan skips tax returns, W-2s, and pay stubs. You'll typically need your ID, bank statements showing your down payment and reserves, the lease or the appraiser's rent estimate, an insurance quote, and entity documents if you're closing in an LLC. The Mortgage Advisory sends you a simple checklist up front so your file moves fast.
How much down payment do I need for a DSCR loan?
Most DSCR purchase loans need about 20% to 25% down. Strong credit and a ratio well above 1.0 get you toward the low end; a lower score, a ratio under 1.0, or a short-term rental can push it to 25% to 30% or more. The Mortgage Advisory shows you the down payment, rate, and reserves side by side so you can pick the trade-off that fits.
Can a first-time investor get a DSCR loan?
Yes. Many DSCR programs accept first-time investors, though some ask for a bigger down payment, a higher ratio, or extra reserves if you've never owned a rental. Owning the home you live in often helps. The Mortgage Advisory will match you with programs that welcome first-time investors and walk you through the numbers before you buy.
Can I get a DSCR loan in an LLC?
Yes. Most DSCR programs let you buy or refinance in an LLC, corporation, or other business entity, and many investors prefer it. You'll usually sign a personal guarantee, and the lender will ask for the entity's formation documents. The Mortgage Advisory closes DSCR loans in LLCs regularly and tells you up front exactly what paperwork is needed.
Is there a limit on how many rental properties I can finance with DSCR loans?
Most DSCR lenders don't put a hard cap on how many rental properties you own or finance, unlike conventional loans, which cap most investors at 10 financed properties. Some lenders limit how many loans or how much total balance they'll hold with one borrower. The Mortgage Advisory helps investors with growing portfolios spread loans across programs so they can keep buying.
Can I use a DSCR loan to buy rentals in Texas, Florida, or Colorado if I live in California?
Yes. You can live anywhere and use a DSCR loan to buy rentals in another state, as long as the lender is licensed where the property is. The Mortgage Advisory lends in California, Texas, Florida, and Colorado, so California investors buying in Texas or Colorado work with the same team (in Florida, we arrange DSCR loans as a licensed mortgage broker).
How do prepayment penalties work on DSCR loans?
Most DSCR loans include a prepayment penalty: a fee if you pay off or refinance the loan within the first one to five years. A longer penalty usually gets you a lower rate; a shorter penalty or none costs a bit more in rate. The Mortgage Advisory shows you every penalty option in dollars before you choose, so there are no surprises when you sell or refinance.
Why are DSCR loan rates higher, and what affects my rate?
DSCR loan rates are usually higher than conventional investment loans because the loans can't be sold to Fannie Mae or Freddie Mac and they skip personal income verification. Your rate mainly depends on your credit score, down payment, the property's ratio, the prepayment penalty you choose, and the property type. The Mortgage Advisory shows you how each of those moves your rate, so you can decide what's worth paying for.
What are the requirements for a DSCR loan?
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.
Can I use a DSCR loan for an Airbnb or short-term rental?
Yes. Many DSCR programs finance short-term rentals like Airbnb and VRBO properties. The rent is based on your past booking history or a short-term rental market report, and expect a larger down payment, often about 25%, plus a careful look at local rules. The Mortgage Advisory checks the program and the city's short-term rental rules before you write an offer.
Can I get a DSCR loan if the rent doesn't cover the payment?
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.
DSCR loan vs. conventional investment loan: which is better?
Conventional investment loans usually have lower rates, but they require full tax returns, count against your debt-to-income, and cap most investors at 10 financed properties. DSCR loans cost more but qualify on the property's rent alone. The Mortgage Advisory offers both and will compare them side by side for your situation.
How do you calculate DSCR on a rental property?
DSCR, the debt service coverage ratio, is the property's monthly rent divided by its full monthly payment: principal, interest, property taxes, insurance, and any HOA dues. A ratio of 1.0 means the rent covers the payment exactly, and most programs want 1.0 or higher. The Mortgage Advisory runs the ratio with real rent and real insurance quotes before you make an offer.
What is a DSCR loan, and how do I qualify for one?
A DSCR loan is for rental properties: you qualify based on whether the property's rent covers its payment, not on your personal income or tax returns. Most programs look for rent at or above the full monthly payment and ask for about 20% to 25% down. 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), and we're upfront about the prepayment penalties that often come with them.