What do you need to qualify for a DSCR loan?

To qualify for a DSCR loan, many lenders look for a credit score of roughly 620 to 680, a down payment of 15% to 25%, rental income that covers the full payment at a ratio near 1.00, and 3 to 6 months of payments in reserve. The property must be an investment property you will not live in. These ranges come from the public program pages and matrices of non-QM lenders including Angel Oak, AD Mortgage, Deephaven and Visio Lending, and every lender sets its own guidelines.

A DSCR loan (debt service coverage ratio loan) is a business-purpose mortgage on a rental property that qualifies you on the property's rent instead of your personal income. The lender divides the property's monthly rent by its monthly payment of principal, interest, taxes, insurance and association dues (PITIA).

What do DSCR lenders look at?

DSCR lenders weigh the property's cash flow, your credit score, your equity and your cash reserves. Most programs leave out your tax returns and pay stubs. The table below shows how published guidelines compare across several non-QM lenders. Treat each range as a general program norm. Guidelines change and approval is subject to underwriting.

Requirement	Typical range across lenders	Why it matters	Source
Credit score	620 to 680 minimum; 680 for DSCR below 1.00; 720 for the highest LTV	Sets pricing and how much you can borrow	AD Mortgage, Deephaven, Angel Oak
Max LTV, purchase	75% to 85% (15% to 25% down)	Determines your down payment	Angel Oak, Deephaven, Visio
Max LTV, cash-out	About 75% at Deephaven, 5 points below its purchase cap	Caps the equity you can pull out	Deephaven
DSCR ratio	1.00 is the common baseline; some allow below 1.00 or no ratio	Shows the rent covers the payment	AD Mortgage, Angel Oak, Deephaven
Reserves	3 months PITIA up to a $1M loan; 6 months above $1M or below a 1.00 DSCR	Proves you can carry vacancies and repairs	Deephaven 2023 matrix
Loan amount	$100,000 minimum; $2.5M to $3M maximum	Small loans and very large loans fall outside many programs	Angel Oak, Deephaven
Property type	1-4 units, condos (including many non-warrantable), short-term rentals	Each type can carry its own LTV cap	Deephaven, Angel Oak, AD Mortgage
Vesting	Personal name, LLC, corporation or revocable trust	Lets you hold rentals in an entity	Angel Oak, Deephaven
Prepayment penalty	1 to 5 years, such as a 5-4-3-2-1 step-down	Affects the cost of selling or refinancing early	Deephaven 2023 matrix, Visio
Occupancy	Investment property only	Keeps the loan in business-purpose credit	CFPB Regulation Z commentary

What credit score and down payment do you need for a DSCR loan?

Published DSCR minimums commonly sit between 620 and 680, and the top LTV tiers start at higher scores. Many lenders cap a purchase at 75% to 85% LTV, which means 15% to 25% down. Cash-out refinances get a lower LTV cap than purchases at many lenders. A higher score can raise the LTV a lender allows.

The published floors differ by lender. AD Mortgage's DSCR program lists a 620 minimum FICO and up to 80% CLTV. It requires a 680 score when the DSCR falls below 1.00. Deephaven's wholesale page lists a 640 minimum. Angel Oak starts at 680 for loans up to 75% LTV.

LTV limits widen as your score rises. Angel Oak's investor cash flow program goes up to 85% LTV with a minimum 720 score. Visio Lending advertises 85% LTV on DSCR purchase loans, which means 15% down.

Cash-out limits sit below purchase limits. Deephaven's DSCR page allows up to 80% on purchase and rate-and-term refinances and up to 75% on cash-out, with cash-out capped at $1 million.

Pull your own credit before you shop a property. A score just under a lender's tier line, such as 678 instead of 680, can change both your rate and your maximum loan.

What DSCR ratio do lenders require?

Many DSCR lenders treat a ratio of 1.00 as the baseline, meaning the rent covers the full PITIA payment. Some lenders price loans better above a 1.25 ratio. Some lenders also offer programs below 1.00 or with no ratio at all, in exchange for a higher credit score, a lower LTV or more reserves.

Deephaven's December 2023 matrix defines DSCR as gross rents divided by PITIA on a fully amortizing loan, or gross rents divided by ITIA on an interest-only loan. In that matrix, rent is the lesser of the appraiser's market rent estimate and the existing lease.

Below-1.00 options carry conditions. AD Mortgage allows a DSCR below 1.00 at 75% LTV or less with a 680 score, and excludes condos and condotels from that option. It also lists improved pricing above a 1.25 ratio. Angel Oak lists both below-1.00 and no-ratio options. Deephaven's 2023 matrix limited below-1.00 loans to purchases and required 6 months of reserves.

The table below is a hypothetical illustration, not an offer or a quote.

Hypothetical rental	Amount
Monthly market rent	$2,400
Principal and interest	$1,500
Property taxes	$300
Insurance	$150
HOA dues	$50
Total PITIA	$2,000
DSCR ($2,400 / $2,000)	1.20

In this example the rent covers the payment 1.20 times. If the taxes rose by $400 a month, PITIA would reach $2,400 and the ratio would fall to 1.00.

Get real tax, insurance and HOA figures before you run the math. A higher insurance or tax figure than you assumed can push the ratio below a lender's threshold.

How many months of reserves do DSCR lenders require?

Reserves are cash you still hold after closing, measured in months of the property's PITIA. Many DSCR programs ask for 3 to 6 months. At many lenders, larger loans and loans with a ratio below 1.00 need the high end. Some lenders let cash-out proceeds count toward reserves.

Deephaven's December 2023 wholesale matrix set reserves at 3 months of PITIA for loans of $1 million or less. It required 6 months for loans above $1 million, for a DSCR below 1.00 and for foreign nationals. Deephaven and AD Mortgage both state that cash-out proceeds can be used as reserves.

Keep the reserve funds in an account you can document with statements. Ask each lender which account types it will count toward reserves.

Which properties and borrowers qualify for a DSCR loan?

DSCR loans are for investment properties you do not occupy. Most programs cover 1-4 unit homes, townhomes and condos, and many accept short-term rentals. Many lenders let you borrow in your own name or through an LLC. Several lenders set a minimum loan amount of $100,000.

The investment-only rule rests on federal law. The CFPB's Regulation Z commentary treats credit to buy, improve or maintain a rental property that is not owner-occupied as business-purpose credit. A property counts as owner-occupied if you expect to stay there more than 14 days in the coming year. A primary residence or second home belongs in a different loan program.

Property types vary by lender. Deephaven's 2023 matrix listed single-family homes, PUDs, townhomes, 2-4 units and condos, with non-warrantable condos capped at 75% LTV. Angel Oak accepts warrantable condos, non-warrantable condos and condo hotels. For short-term rentals, AD Mortgage allows up to 80% CLTV, and Angel Oak can use an AirDNA rental analysis to estimate income.

Entity borrowing is common. Angel Oak allows title in an LLC, S corp, C corp or revocable trust. Visio Lending requires an entity in some states, including Pennsylvania and Virginia.

Loan size has limits on both ends. Angel Oak and Deephaven list a $100,000 minimum. Published maximums run from $2.5 million at Deephaven to $3 million at Angel Oak.

If you plan to vest in an LLC, form it before you apply. Lenders review the entity's documents and ownership during underwriting.

What prepayment penalties are common on DSCR loans?

Many DSCR loans carry a prepayment penalty that applies if you sell or refinance in the first one to five years. The most common structure is a step-down, such as 5%, 4%, 3%, 2% and 1% of the balance over five years. Some states restrict these penalties.

Deephaven's December 2023 matrix listed four options. A 5-year penalty stepped down from 5% to 1%. A 3-year penalty stepped down from 3% to 1%. A 2-year penalty ran at 2% then 1%. A 1-year penalty was a flat 1%. The matrix applied penalties to investment properties only and noted that state restrictions apply.

State law can remove the option. Visio Lending lists Ohio, Maryland and Pennsylvania among states where its DSCR loans carry no prepayment penalty.

Match the penalty term to your plan. If you might sell or refinance within three years, ask how a shorter penalty term changes the pricing, then compare that against the penalty you would pay at the exit.

What documents do you need for a DSCR loan?

DSCR loans skip most personal income paperwork. Most programs do not ask for tax returns, W-2s, pay stubs or employment verification. You still provide proof of the property's rent, bank statements for the down payment and reserves, a credit report authorization and, if you borrow through an entity, the entity's documents.

Angel Oak states that no income or employment verification and no tax returns are required. AD Mortgage also lists personal income and employment verification as not required.

Expect to provide these:

• An appraisal with Fannie Mae Form 1007, the comparable rent schedule, which sets market rent. Angel Oak allows a 1007 waiver on 1-unit properties at up to 75% LTV.
• A current lease if the property is rented. Deephaven's 2023 matrix used the lesser of the 1007 rent and the lease, or the higher lease rent with three months of receipts.
• Bank or asset statements showing your down payment, closing costs and reserves.
• The purchase contract on a purchase, or the current mortgage statement on a refinance.
• Entity formation documents and an operating agreement if you close in an LLC.

Gather the lease and rent receipts early. On a refinance, three months of receipts can let a lender use a lease that is higher than the appraiser's estimate.

How Aaron approaches this

Aaron Ehresmann is a Loan Originator at West Capital Lending in Irvine, California (individual NMLS #2099240, company NMLS #1566096). He has access to 90+ lenders and shops each DSCR scenario across them rather than offering one in-house product. The DSCR programs he places typically start at a 620 credit score.

He is licensed in AR, AZ, CA, CO, CT, DC, FL, ID, KY, MD, ME, MN, OH, OR, PA, TN, VA, WA and WY. The next step is the DSCR loan page on this site, where you can share the property and the numbers.