DSCR LOAN REQUIREMENTS
What Is a DSCR Loan? Requirements and Guidelines Explained
A DSCR (Debt Service Coverage Ratio) loan is a type of real estate investment loan that qualifies borrowers based on a property’s rental income rather than personal income. As a trusted Texas DSCR lender, Lone Star Financing uses the DSCR ratio to assess whether a property’s rental income is sufficient to support the mortgage payment.
Most DSCR lenders require a minimum ratio—commonly between 1.00 and 1.20 or higher—based on the property type, lender guidelines, and overall risk profile. Calculate DSCR ratio to see if your property qualifies.
Typical DSCR Loan Requirements
Programs vary by lender and market— the guidelines below provide a baseline for most DSCR loans.
| DSCR Requirement |
1.00 – 1.20+, depending on program
Some lenders allow lower DSCR with stronger credit, lower LTV, or reserves
|
| Credit Score |
620 – 660+
Higher scores unlock better rates and leverage
|
| Loan-to-Value (LTV) |
Up to 80% on purchases
Up to 75% on cash-out refinances
|
| Loan Amounts |
$100,000 to $5,000,000+
Portfolio and large-balance DSCR programs available
|
| Eligible Properties | SFR, STR / VRBO, 2–4 unit, Small multifamily |
Additional DSCR Loan Guidelines to Know
While the table above outlines typical DSCR loan requirements, individual programs may vary by lender. Below are additional factors that can impact eligibility, pricing, and loan structure.
Common DSCR Lending Considerations
Property Cash Flow: Rental income is typically based on the appraiser’s market rent or current lease, whichever is lower.
Borrower Income: Personal income and employment are generally not required, as qualification is based on property performance.
Entity Ownership: DSCR loans can often be closed in an LLC, corporation, or trust structure.
Reserves: Many lenders require cash reserves, typically ranging from 3–12 months of mortgage payments.
Prepayment Penalties: Some DSCR programs include prepayment penalties, especially for refinances or investor-focused products.
Interest Rates: Rates may be higher than traditional conventional loans but offer greater flexibility and faster approvals.
When DSCR Loans Make Sense
DSCR financing is ideal for real estate investors who:
Own multiple rental properties
Are self-employed or have complex income
Want to scale without impacting personal DTI
Prefer faster underwriting with fewer documents
Important Note
DSCR loan guidelines can change based on market conditions, property type, and lender appetite. Working with an experienced DSCR broker ensures you’re matched with the right program for your investment strategy.
Frequently Asked Questions About DSCR Loans
In Texas, most DSCR lenders require a minimum debt service coverage ratio between 1.00 and 1.20, depending on the property type and loan program. Additional requirements typically include a minimum credit score, sufficient cash reserves, and an income-producing rental property. At Lone Star Financing, we help investors compare multiple DSCR lenders to find programs with the most flexible guidelines.
No. DSCR loans are primarily qualified based on the rental income of the property, not the borrower’s personal income. Most Texas DSCR programs do not require tax returns, W-2s, or employment verification, making them ideal for real estate investors, self-employed borrowers, and those with complex income.
Yes. Texas DSCR loans can be used for both purchases and refinances, including cash-out refinances. Eligible properties commonly include single-family rentals, short-term rentals (Airbnb/VRBO), 2–4 unit properties, and small multifamily buildings. Loan-to-value limits and DSCR requirements may vary by use case.
Lone Star Financing specializes in Texas investment property lending and works with multiple DSCR lenders to offer competitive rates and flexible guidelines. Instead of being limited to one bank, we match Texas investors with the right DSCR program based on property cash flow, leverage goals, and long-term strategy.
Whether you’re buying your first rental or scaling a national portfolio, we help you finance smarter — and close faster. Use the free DSCR calculator to calculate your DSCR ratio or visit the DSCR guidelines page to view all loan programs and lending guidelines.