Understanding DSCR Loan Requirements

Debt Service Coverage Ratio (DSCR) loans are designed specifically for real estate investors who want to qualify based on the property’s income potential rather than their personal income. At FAAS Funding, we specialize in DSCR loans that make investment property financing straightforward and accessible.

Basic DSCR Loan Requirements

Minimum DSCR Ratio

The property’s rental income must meet or exceed the debt obligations. We offer:

  • DSCR of 1.0 or higher: Best rates and terms
  • DSCR of 0.75-0.99: Competitive rates available
  • DSCR below 0.75: May require additional down payment

Credit Score Requirements

  • Minimum credit score: 620
  • Preferred credit score: 680+ for best rates
  • No maximum: Higher scores qualify for better terms

Down Payment

  • Minimum: 20% down payment
  • Standard: 20-25% for most investors
  • Lower DSCR: May require 25-30% down

Property Requirements

Eligible Property Types

  • Single-family residences
  • 2-4 unit multifamily properties
  • Condominiums and townhomes
  • Warrantable condos

Property Condition

  • Must be in livable, rentable condition
  • No major repairs needed
  • Standard appraisal required
  • Must meet minimum property standards

Documentation Requirements

Required Documents

  • Photo ID (driver’s license or passport)
  • Proof of assets and down payment funds
  • Purchase contract (for purchases)
  • Current lease agreement (if applicable)
  • Property insurance information
  • Entity documents (if purchasing as LLC)

Income Documentation

One of the key benefits of DSCR loans is no personal income verification required. The property’s rental income is determined by:

  • Current lease agreement, or
  • Appraisal with rental analysis, or
  • Market rent schedule

Borrower Qualifications

Experience Level

  • First-time investors: Welcome
  • Experienced investors: Preferred rates
  • No minimum number of properties required

Entity Ownership

You can take title as:

  • Individual borrower
  • LLC (Single member or multi-member)
  • Corporation or Trust
  • Partnership

Loan Terms and Limits

Loan Amounts

  • Minimum: $75,000
  • Maximum: $3,000,000+
  • No portfolio limits: Finance multiple properties

Loan Terms

  • 30-year fixed rate
  • Interest-only options available
  • No prepayment penalties on most programs

Geographic Restrictions

Available States

DSCR loans are available in most states. Some restrictions may apply for:

  • Rural properties
  • Properties in declining markets
  • Properties in natural disaster zones

Additional Requirements

Reserves

Cash reserves typically required:

  • 6 months PITIA: Standard requirement
  • Higher for multiple properties: 6-12 months
  • Reserves can include: Checking, savings, retirement accounts (70% value)

Property Insurance

  • Hazard insurance required
  • Flood insurance (if in flood zone)
  • HOA insurance (if applicable)

What Makes FAAS Funding Different

Streamlined Process

  • Quick pre-approval in 24-48 hours
  • Minimal documentation requirements
  • Close in as little as 21 days
  • Dedicated loan specialist

Flexible Guidelines

  • Accept lower DSCR ratios
  • Work with various credit profiles
  • Multiple property financing
  • Portfolio loans available

How to Calculate Your DSCR

The DSCR formula is simple:

DSCR = Monthly Rental Income / Monthly Debt Obligations

Where Monthly Debt Obligations include:

  • Principal and interest payment
  • Property taxes
  • Insurance
  • HOA fees (if applicable)

Example:

  • Monthly rental income: $2,500
  • Monthly PITIA payment: $2,000
  • DSCR = $2,500 / $2,000 = 1.25

Use our DSCR Calculator to calculate your property’s ratio instantly.

Frequently Asked Questions

Can I qualify with no rental income history?

Yes! We use market rent analysis from the appraisal to determine the property’s rental income potential.

Do I need to show tax returns?

No personal tax returns or income documentation required. That’s the main benefit of DSCR loans.

Can I finance multiple properties?

Absolutely. There’s no limit to the number of DSCR loans you can have.

What if the property is vacant?

Vacant properties are eligible. We use the appraisal’s market rent analysis.

Are there prepayment penalties?

Most of our DSCR loan programs have no prepayment penalties.

Ready to Get Started?

Our DSCR loan specialists are ready to help you finance your next investment property. With competitive rates, flexible guidelines, and a streamlined approval process, FAAS Funding makes real estate investing accessible.

Contact us today to:

  • Get pre-approved in 24-48 hours
  • Discuss your investment goals
  • Calculate your property’s DSCR
  • Learn about our current rates

Apply Now or call us at [your phone number] to speak with a DSCR loan specialist.