Apr 6, 2022
How Do You Get A Mortgage For A Rental Property?
Review how rental-property financing differs from financing a home you live in.
Read article : How Do You Get A Mortgage For A Rental Property?Investment property financing
DSCR Loans for Rental Property Investors
A DSCR loan is investment-property financing that evaluates qualifying rental income against the property's loan and housing expenses, rather than a traditional personal debt-to-income calculation.
Discuss your rental property financing →Answer a few questions about your property and plans.
Understanding the program
What does DSCR mean?
Debt-service coverage ratio compares a property's qualifying income with the debt obligations counted by the lender. The income calculation, expenses included, and acceptable ratio depend on the program.
The basic idea: property income ÷ qualifying debt obligations.
The lender determines which rent figure and housing expenses to use. These may include principal, interest, taxes, insurance, association dues, and applicable management fees. Interest-only options can use a different payment basis. A ratio of 1.00 means qualifying rent equals the payment used in that calculation. DSCR is not a measure of net profit, and a ratio by itself is not an approval decision.
A PLANNING EXAMPLE
See how accepted rent affects coverage.
| Accepted monthly rent | Required housing payment | Illustrative DSCR |
|---|---|---|
| $3,000 | $2,400 | $3,000 ÷ $2,400 = 1.25 |
| $2,640 | $2,400 | $2,640 ÷ $2,400 = 1.10 |
Assume the lender accepts the rent shown and uses a total required housing payment of $2,400. That payment includes applicable principal, interest, taxes, insurance, association dues and program-required management expenses. Selected interest-only methods use a different payment basis.
The accepted rent may differ from advertised revenue. These examples show arithmetic only, not approval or a qualification threshold. DSCR is not net profit: repairs, vacancy, utilities, capital replacements and other costs may not all be included in the qualifying calculation. The calculator estimates; your loan officer confirms the lender-specific rent and payment basis.
At a glance
DSCR Program Highlights
Explore financing options for your next rental-property investment.
- Loan amount
- $50,000–$3 million on selected programs. Minimums and maximums vary. Cash-out loan size and the cash you can receive are separate limits.
- Credit score
- Credit scores as low as 620 on selected purchase options with DSCR of at least 1.00, loan amounts up to $1 million, and at least 25% down. When all borrowers are first-time investors, at least 35% down is required for this credit-score option. Other limits apply.
- Down payment / equity
- Down payments as low as 15% on eligible purchases with credit scores of at least 700, DSCR of at least 1.00, and loan amounts up to $1 million. When all borrowers are first-time investors, at least 20% down is required for this option. Property, rental, and other restrictions may require more.
Minimum credit score and minimum down payment apply to different qualifying scenarios and may not be combined.
- Occupancy
- Investment / rental property.
- Property types
- Single-family homes, 2–4 units, condos, and PUDs. Selected non-warrantable condos may qualify.
- Rate structure
- Fixed and ARM options.
- Interest-only
- Available on selected programs.
- Amortization / repayment
- 30- and 40-year options.
- LLC closing
- Yes, for eligible entities on selected programs. Entity ownership does not automatically remove personal liability.
- Minimum DSCR
- Selected programs consider ratios below 1.00, with additional credit, equity, loan amount, or other requirements. Lower coverage does not establish profitability or approval.
Rate and repayment structures vary by program and may have different qualification requirements. ARM rates and payments can change after the initial fixed period. Interest-only payments do not reduce principal during the interest-only period; payments can increase substantially when principal repayment begins. Business-purpose investment properties only; not for personal, family, or household use. Features reflect different programs and may not be available together. Terms depend on the lender, property, credit profile, loan amount, and complete borrower scenario. All loans are subject to underwriting and program availability.
Where we can help
Available States
Explore DSCR financing with PMF in Michigan, Florida, and California.
Alabama, Alaska, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Mexico, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, Washington, Wisconsin, and Wyoming, plus Washington, D.C.
Program availability and terms depend on your property, intended rental use, ownership structure, and complete scenario.
Who it may fit
For investors looking at the property's potential.
DSCR may be worth exploring when you are buying or refinancing a rental property and want to discuss a qualification approach centered on rental income.
Start a conversation if you are:
- Purchasing a property you plan to rent out.
- Refinancing an existing investment property.
- Self-employed or managing multiple income sources.
- Comparing property-based qualification with conventional investment financing.
Common uses
Where DSCR may enter the picture.
Purchase a rental
Explore financing for your next income-producing investment property.
Refinance a rental
Review financing options for an investment property you already own.
Explore cash-out
Discuss accessing eligible equity for a documented business purpose, subject to program limits and ownership-history requirements.
SUPPORTING THE RENT
What rental evidence may be needed?
Long-term leased
A lease, rent receipts and appraisal rental analysis may be reviewed. The program determines which rent is accepted.
Vacant, rent-ready purchase
Market-rent analysis and specific property eligibility may support selected purchases. An unleased refinance has different rules; no tenant does not automatically mean eligible.
Short-term rental
Existing booking history, appraisal analysis or an approved market report may be required where permitted. Projections alone are not universally accepted.
Confirm that the proposed rental use is permitted for the property, including applicable local, association and insurance requirements. Income adjustments and lending limits vary by program.
COMPARE INVESTMENT FINANCING
DSCR or conventional investment financing?
| Consideration | DSCR | Conventional investment loan |
|---|---|---|
| Qualification focus | The property's accepted rent relative to its qualifying housing payment, plus borrower, funds and property requirements. | Personal income and debt-to-income review, including eligible rental income under agency and lender rules. |
| Borrower structure | Selected programs permit eligible entities; personal signatures or guarantees may still apply. | The conventional options described by PMF close in eligible individual borrowers' names. |
| What to compare | Documentation, down payment, reserves, rate, APR, points, fees, payment changes and early-payoff terms. Requirements and costs depend on the complete scenario. | |
Explore PMF's Conventional loan options →
LLC title and personal loan or guarantee obligations are separate. Entity closing does not itself establish nonrecourse financing, eliminate all personal liability or determine credit reporting. Ask your loan officer to confirm the borrowing entity, required signatures and reporting for the actual offer.
Key features
A different way to review the scenario.
- A focus on qualifying rental income and property debt obligations.
- An alternative documentation approach to discuss alongside other investment loans.
- Potential purchase and refinance paths, depending on lender and property eligibility.
Qualification considerations
What we'll need to understand.
- Property address and state, type, number of units, and purchase or refinance plans.
- Price or estimated value, requested loan amount, and available closing funds and reserves.
- Tenant or short-term-rental status, lease or market-rent assumptions, and taxes, insurance and association dues.
- Credit profile, ownership history and intended borrowing entity.
- Intended holding or refinance timeline, loan costs and early-payoff terms.
Your loan officer will explain the appropriate secure process for property, rental and entity records. Do not upload sensitive documents through a public inquiry field.
DSCR is not a no-requirements loan. Property, borrower, documentation, and state requirements still apply.
Questions investors ask
DSCR loan FAQs
How does a DSCR loan differ from a conventional investment-property loan?
DSCR financing focuses on qualifying rental income and property housing expenses instead of a traditional personal debt-to-income calculation. Credit, assets, property, and supporting documents still matter. We can help you compare the approaches.
How is DSCR calculated?
DSCR compares qualifying rent with the housing payment used by the lender. Rent, expenses, and payment methods vary by program. Our calculator provides an estimate, not a net-profit calculation or approval. PMF can review the lender-specific figures.
Can I qualify if the DSCR is below 1.00?
Selected programs may consider a lower ratio with additional requirements or compensating factors. A low ratio does not establish eligibility by itself. Share the property details so we can review possible options.
Do I need tax returns or employment income to qualify?
Selected DSCR programs use the subject property's rental income instead of documenting personal employment income. That does not mean no documentation: your credit, funds, rental-income support, and property still need review.
What documents should I have ready?
Start with property details and any lease or rental records. Expect appraisal and rental analysis, credit review, and verification of funds for closing and required reserves. Your loan officer will confirm the documents for your scenario.
Can I use this loan for my primary residence or vacation home?
No. These programs are for business-purpose investment properties intended for rental use. A short-term rental is different from a vacation home you use personally.
Can I finance an Airbnb or other short-term rental?
Selected programs consider short-term rentals. Rental history, appraisal analysis, and an approved market-rent report may be needed. Income adjustments and lending limits differ, so let us review the property. See the rental-evidence guide above.
Does the property need a tenant already?
Not always. Selected programs consider vacant or unleased rentals using qualifying market rent and additional requirements. Purchase and refinance rules can differ. Tell us the property's rental status so we can review the options. See the rental-evidence guide above.
Can I close in an LLC, and will I need a personal guarantee?
Selected programs allow eligible entities, but owners still have qualification and documentation requirements. Closing in an LLC does not automatically make the loan free of personal liability. Ask PMF about the guarantees or individual signatures required.
Can a first-time real estate investor qualify?
Selected programs consider first-time investors with additional requirements. Being new to investing is different from being a first-time homebuyer. Let us review your ownership history and available options.
Which property types can qualify?
Selected programs consider single-family homes, 2–4 unit properties, condos, and planned communities. Some non-warrantable condos may qualify. Ask us about the property you have in mind.
Can I refinance and take cash out?
Yes, on selected programs. Equity, ownership and mortgage history, and documented business use of the proceeds affect the options. Ask PMF how much may be available for your plans.
Is there a charge if I pay the loan off early?
Some DSCR options have a prepayment charge. Before choosing a loan, ask:
- Does it apply to a sale, refinance, full payoff or partial principal reduction?
- What are its duration, start and end dates, and calculation basis?
- Is any partial-payment allowance available?
- Are alternatives available, and how do their pricing and terms differ?
Compare your intended holding or refinance timeline with the actual written terms. Program, property, state and contract requirements determine the options. A future refinance is not guaranteed.
Can I combine the lowest score, smallest down payment, and largest loan amount?
Not necessarily. The highlights reflect different program options, and those features may not be available together. Let us review the combination that fits your scenario.
What happens after I share my scenario?
A licensed PMF loan officer will review your property and goals, then discuss potential options and next steps. An inquiry is not an approval or a binding quote.
Have a rental property in mind?
Tell us about the property and what you want to accomplish.
Discuss your rental property financing →Reviewed by Pro Mortgage Funding ·
Program availability and terms depend on your complete scenario and underwriting. This is not a commitment to lend. An inquiry is not an approval.