DSCR Loans

Below are the key components of our DSCR loan program.

See ineligibility criteria here.

 

  • Loan

    • Minimum: $50K

    • Maximum: $2MM

    • Loan-to-Cost/AIV: Up to 80%

    • Term: 360 months

    • Type: Purchase or Refinance (including cash-outs)

    • Rate Type: Fixed or adjustable rate mortgage

    • Rate Lock: Locked for 21 days after receiving a full file, including the appraisal, title and borrower docs

    • Payment Type: Typically 30-year fixed; ARMs available upon request (restrictions apply)

    • Escrow: Tax and insurance

    • Payment Frequency: Monthly

    • Pre-Payment Penalty: 5 Years (5/4/3/2/1%)

    • Closing Time: Within 10-15 business days from full file receipt

    • Portfolio Loans: See summary here

  • Property

    • Type: SFR, Condo, 2-4 Units

    • Area: Urban, Suburban

    • Use: Residential, Non-Owner Occupied Only

    • Minimum Value: $75K

    • DSCR: At least 1.20

    • Condition: C1 to C4 and rent ready with no renovation/repairs required (as per appraisal)

    • Market: If declining, then -5% of eligible maximum LTV

    • Vacancy (Purchase): Permitted for all property types.

    • Vacancy (Refinances): SFR - Not allowed; 2-4 Units - No more than one vacancy allowed; partially vacant properties are subject to a 5% LTV reduction; vacancies more than 2 months not allowed.

    • Mixed Use: Ineligible

    • Short Term Rentals: Ineligible

    • 5+ Units: Case by case. Contact us for more information.

    • Eligible States: AL, AR, CO, CT, DE, FL, GA, HI, IA, IL, IN, KS, KY, LA, MA, MD, ME, MO, MS, MT, NH, NM, OH, OK, SC, TX, WA, WI, WV, WY

  • Borrower

    • Type: Typically LLC or corporation; individual borrowers: case by case

    • Guarantor: At least one eligible 20%+ owner; at least 21 years of age

    • Minimum Guarantor Credit Score: At least 660

    • Representative Guarantor Credit Score: Lowest median score

    • Guarantor Credit Report: Minimum of 3 credit accounts (open or closed) must be reported; minimum of 2 active credit accounts during last 60 days; minimum of 1 credit account established more than 24 months ago; no more than one 30 days late payment on mortgage loan during the last 12 months; authorized user accounts are not eligible credit accounts; derogatory accounts and collection accounts are not eligible credit accounts

    • Guarantor Background: No derogatory credit events (e.g. bankruptcy, foreclosure, short-sale, deed-in-lieu, etc.) within the past 36 months; no felony convictions, misdemeanor convictions involving fraud, embezzlement or other similar crimes; no late mortgage payment on credit report within the past 24 months; no indications of late payments on payoff statements (for refinances)

    • Experience: At least one guarantor has owned real estate during the last 36 months.

    • Liquidity Requirement: Closing Costs + 1% UPB of Mortgages on Credit Report + Nine Months of PITIA

    • Foreign Nationals: Case by case. Contact us for more information.

    • ACH for Monthly Payment: Required

  • Fees

    • Lender Fees: 2% Origination Fee + Service Fee* (both collected at closing)

    • Third Party Fees: TBD; typical costs include title, insurance, recording, appraisal, and legal. Assume $600-800 for an appraisal before closing and $1,000 for legal doc prep at closing. Wholesaler fees are capped at 20%, if applicable.

*Service Fee: $995 for SFR; $1,495 for 2-4 Units

GET AN INSTANT QUOTE

Lendency DSCR Program Snapshot

  • Minimum Credit Score: 660 (Qualifying Representative FICO)

  • Maximum LTV (Purchase & Rate/Term): 80%

  • Maximum LTV (Cash-Out Refinance): 75%

  • Minimum Loan Amount: $50,000

  • Minimum Property Value: $75,000

  • Eligible Properties: 1–4 Units, Condos, Townhomes

  • Reserve Requirements: 6–12 Months PITIA (depending on loan profile)

  • Available Terms: 30-Year Fixed, 5/1 ARM, 10/1 Interest-Only ARM

  • Borrowing Entities: LLCs, Corporations, and Trusts (Personal Guarantee Required)

Frequently Asked Questions:

Basics

What is a DSCR loan and how does it work?

A DSCR (Debt Service Coverage Ratio) loan is an investment property mortgage where approval is based mostly on the property’s rental income versus the mortgage payment, not the borrower’s personal income. Lenders use DSCR to gauge if the property’s income can comfortably cover the debt.

Who are DSCR loans designed for?

These are designed for real estate investors buying or refinancing non‑owner‑occupied rentals, such as single‑family homes and 2–4 unit properties.

How is the DSCR ratio calculated?

The basic formula is your qualifying gross monthly rental income divided by the total proposed PITIA (Principal, Interest, Taxes, Insurance, and HOA). For us, a ratio above 1.0 means the property brings in more income than the mortgage costs, though we can consider ratios below 1.0 under certain conditions.

Qualification & Requirements

What DSCR ratio do I need to qualify for a loan?

Most programs want at least 1.20 DSCR for best terms; some will go lower with higher rates, extra reserves, or lower LTV. Our programs are flexible enough to allow for a DSCR below 1.0 if the borrower maintains 12 months of subject property PITIA in liquid reserves.

Do you look at my personal income or tax returns for approval?

Typically, no full income documentation is required; the focus is on the property’s cash flow, your credit profile, and assets for down payment and reserves. For our loans, while we don't require tax returns, we do perform standard background, identity, and OFAC checks to verify borrower eligibility.

What is the minimum credit score for a DSCR loan?

Minimums vary by lender, but many DSCR programs start around the mid‑600s, with better pricing as scores increase. For our specific programs, the qualifying representative FICO score must be 660 or greater.

How much down payment do I need for a DSCR property?

Common maximum LTVs are about 75–80% for stronger files, which means 20–25% down. For our programs, we allow for up to 80% LTV for purchases and rate/term refinances, while the maximum is 75% LTV for cash-out refinances; additionally, we require a minimum of $10,000 in hard equity for all purchase transactions.

Can I qualify for a loan if my DSCR is below 1.0?

Some investors can still get approved with DSCR under 1.0 (negative cash‑flow deals) if they have strong credit, more down payment, or extra reserves, but rates and terms are usually worse. We allow for sub-1.0 DSCR ratios provided the borrower has at least 12 months of PITIA in liquid reserves.

Property & Structure

What property types are eligible for DSCR financing?

Typical eligible collateral includes 1–4 unit investment properties, condos, and townhomes. For us, properties must have a minimum value of at least $75,000 to be eligible.

Can I close a DSCR loan in an LLC or corporation?

Many DSCR lenders allow you to take title in an LLC or other entity, with a personal guarantee; requirements vary by lender and state. We permit various entities including LLCs, Corporations, and Revocable Living Trusts, but a personal guarantee is mandatory for all our loans.

Are short‑term rentals like Airbnb or VRBO allowed?

Often yes, but qualifying income may be based on market rents, a short‑term rental report, or historical statements, depending on the lender’s rules. We support short-term rental properties and evaluate them under our specific STR eligibility guidelines.

Are these fixed‑rate or adjustable‑rate mortgage (ARM) loans?

You can usually choose a 30‑year fixed or an ARM; some programs offer interest‑only periods to improve cash flow. Our available ARM products include the 5/1 ARM and the 10/1 Interest-Only ARM.

Documentation & Process

What documents do you need from me for a DSCR application?

Common items include photo ID, entity documents (if using an LLC), a credit authorization, bank statements for down payment and reserves, and an existing lease or rent roll if the property is occupied. For us, bank statements must cover the most recent 60-day period to verify liquidity.

How do you document the rental income for the property?

Lenders rely on an appraisal with a rental schedule, market rent analysis, or current lease agreements. When we evaluate an occupied refinance, we use the lesser of 110% of market rent or the actual in-place lease amount.

How long does the DSCR loan process take from start to finish?

From complete application to closing, 3–5 weeks is typical, depending on appraisal timing, title work, and how fast conditions are satisfied.

Do I need to have cash reserves to qualify?

Yes, most DSCR programs require several months of PITIA in reserves; higher‑risk loans (lower DSCR, higher LTV) usually require more. For us, most 1-4 unit properties require 6 months of reserves, while loans with a DSCR under 1.0 require 12 months.

Costs, Rates, and Terms

Are DSCR interest rates higher than conventional loans?

Yes, DSCR loans usually price higher than standard agency loans because they are non‑QM and underwritten primarily to the property cash flow.

What fees should I expect to pay at closing?

Typical costs include an origination fee or points, appraisal, underwriting/processing fees, title, escrow, and standard third‑party charges.

Can I get a cash‑out refinance with a DSCR loan?

Many programs allow cash‑out refinances on existing investment properties, subject to LTV and DSCR limits. If you have owned the property for less than 90 days, we limit the loan amount to the original purchase price plus documented improvement costs.

Are there prepayment penalties on DSCR loans?

Most DSCR investor loans include a prepayment penalty (often a step‑down over 3–5 years); some lenders offer reduced or no penalties at the cost of higher rates. Our prepayment premiums generally range from 1 to 5 years depending on the selected term.

Strategy & Risk

How can I improve my DSCR ratio before applying?

Common strategies include increasing rents, reducing operating expenses, putting more money down to lower the payment, or buying down the interest rate.

What happens if the property rents go down later?

Your loan terms don’t change just because DSCR drops, but lower rents can impact your cash flow and future refinancing options.

Can I use multiple DSCR loans to build a rental portfolio?

Yes, many investors scale using several DSCR loans since these programs often don’t cap the number of financed properties like conventional lenders do.

How is a DSCR loan different from a hard money loan?

DSCR loans are typically longer‑term, fully amortizing financing with more emphasis on property cash flow and borrower credit, whereas hard money is usually short‑term, higher‑rate, and more focused on the asset as collateral.

Specialized Program FAQs

What is the minimum loan amount for a DSCR loan?

The minimum loan amount for our programs is $50,000, provided the property meets our $75,000 minimum value requirement.

What is your appraisal process for investment properties?

To ensure an independent and accurate valuation, we order the appraisal via an approved Appraisal Management Company (AMC). For loan amounts exceeding $1,500,000, we require two full appraisals from different vendors.

What is a "Delayed Purchase" or cash-recapture transaction?

If you recently purchased a property with cash and no debt, we can help you recoup that capital through a Delayed DSCR Rental Purchase, provided the new loan is made within 6 months of your original acquisition date.

How long is the seasoning requirement for bankruptcy or foreclosure?

If you have experienced a "housing event" such as a bankruptcy, foreclosure, or short sale, we require a 24-month seasoning period before you are eligible for our programs.

Are property taxes and insurance held in escrow?

Yes, for all of our rental loans, we require the escrowing of property taxes and insurance (including flood insurance if the property is in a FEMA-declared flood zone).