For our single property DSCR rental loan you need a DSCR of at least 1.10x, meaning the monthly rent is at least 110% of the full monthly payment. For a rental portfolio loan the minimum is 1.20x. You also need a credit score of at least 660.
How DSCR is calculated
DSCR stands for debt service coverage ratio. For a single rental it is the monthly gross rent divided by PITIA: principal, interest, property taxes, insurance and HOA dues.
Example: rent of $3,200 and a full payment of $2,700 gives a DSCR of 1.19x, which clears the 1.10x minimum.
Which rent counts
- Leased units: the lower of the lease rent or market rent from the appraisal
- Vacant units on a purchase: 90% of market rent
How to improve your DSCR
- Put more down to lower the loan amount
- Shop insurance, which is often the easiest line to reduce
- Consider an interest only ARM option, which lowers the payment
- Raise rent to market before you refinance
Calculate your DSCR now, or see the full DSCR rental loan terms.
Questions
What is the minimum DSCR for a rental loan?
1.10x for our single rental loan and 1.20x for a rental portfolio loan.
Do DSCR loans need tax returns?
No. They are qualified on the property’s rent, not your personal income.