DSCR Loans

A DSCR (Debt Service Coverage Ratio) loan is designed specifically for real estate investors. Qualification focuses primarily on the rental income generated by the property compared with its housing expense, rather than traditional personal employment income.

Key Benefits

• Personal tax returns may not be required
• W-2s and paystubs generally aren't required for income qualification
• Qualification primarily focuses on the property's rental income and applicable housing expense
• Great option for self-employed and experienced investors
• Can help investors finance multiple rental properties
• Available for purchase and refinance
• Cash-out refinancing may be available
• LLC ownership may be permitted under eligible programs
• Certain short-term rental properties may qualify depending on program guidelines

How DSCR Works

For example:

Qualifying Monthly Rent: $3,000
Monthly PITIA: $2,500

DSCR = 1.20

A 1.00 DSCR generally means the qualifying rental income equals the applicable property expense. Higher ratios generally indicate stronger property cash flow.

Things to Consider: DSCR loans commonly require larger down payments than owner-occupied financing. Credit, reserves, property type, DSCR, loan amount and other factors can affect eligibility, rates and terms.

Conventional Investment Property Loans

Traditional Conventional financing can be an excellent option for investors who have qualifying personal income, good credit and sufficient assets.

Unlike DSCR financing, Conventional qualification generally considers the borrower's income, employment, debts, credit and the property's eligible rental income.

Key Benefits

• Often offers more competitive pricing than Non-QM investor financing for well-qualified borrowers
• Rental income may be considered subject to applicable guidelines
• Available for purchase and refinance
• Fixed-rate and adjustable-rate options may be available
• Good option for investors who can qualify using traditional income documentation
• Can finance eligible 1–4 unit investment properties
• May be appropriate for both new and experienced investors

What to Consider

Conventional investment financing generally requires traditional income documentation and qualification based on the borrower's total debt-to-income ratio.

Down-payment requirements are also typically higher for investment properties than for primary residences.

Non-QM Investment Loans

Some investors don't fit neatly into Conventional or standard DSCR guidelines.

Non-QM investment financing may provide additional flexibility for borrowers with unique income, credit, property, or financial situations.

Depending on the program, options may include:

• Alternative income documentation
• Bank Statement qualification
• Flexible investor programs
• Different DSCR requirements
• Financing for certain properties that may not fit traditional guidelines
• Purchase, rate-and-term refinance, and cash-out options
• LLC vesting under eligible programs

These programs generally come with higher down-payment requirements and higher rates or fees compared with traditional Conventional financing.

Investment Property Cash-Out Refinance

Already own rental properties with equity?

A cash-out refinance may allow an eligible investor to access some of that equity for purposes such as:

• Purchasing another investment property
• Renovating or improving existing properties
• Consolidating eligible obligations
• Building available investment capital
• Other permitted investment or financial purposes

Both Conventional and Non-QM/DSCR cash-out options may be available depending on the borrower and property.

Which Investor Loan Is Right for You?

I would put a simple comparison here:

Ready to Finance Your Next Investment Property?

Whether you're purchasing your first rental or expanding a portfolio, we'll help you compare DSCR, Conventional and alternative investor financing options based on your property and financial situation.