The requirements at a glance
These are the ranges we see across investor programs in our lender network. They are not an offer, and the combination available to you depends on the property, the ratio, your credit and the lender the file is placed with.
| Requirement | What lenders commonly look for |
|---|---|
| Property cash flow | Rent compared with the full monthly payment (PITIA). No minimum ratio on select programs up to 75% LTV |
| Credit | From 620 on some programs; strongest pricing at 740 and above |
| Down payment / LTV | Typically 20-25% down on a purchase, 25% or more equity on a cash-out refinance |
| Reserves | Commonly 3-6 months of PITIA in liquid funds, varying by lender |
| Property | 1-4 unit rentals and condos; 5-8 units, mixed-use and short-term rentals on some programs |
| Vesting | Your own name or an LLC, with a personal guaranty on an entity |
| Income documents | None: no tax returns, W-2s, pay stubs or DTI |
| Cash-out seasoning | Often around six months of ownership on many programs |
The property's cash flow (the DSCR itself)
The debt service coverage ratio is the property's qualifying monthly rent divided by its full monthly payment: principal, interest, taxes, insurance and any HOA dues, together called PITIA. A ratio of 1.00 means the rent exactly covers the payment. A 1.25 means it covers the payment with 25% to spare. Below 1.00, the rent falls short.
On many programs the ratio is less a pass/fail test than a pricing input. Files at 1.25 and above generally get the best pricing, 1.00 and above is where standard pricing sits, and a lower ratio usually means lower maximum leverage and a higher price rather than a decline. Our step-by-step guide on how to calculate DSCR walks through exactly what goes into each side, with worked examples.
The rent comes from a signed lease if the property is tenanted, or from the appraiser's market-rent schedule (Form 1007) if it is vacant. Short-term rentals are documented differently, with platform or property manager revenue statements or, on select programs, comparable market data. See short-term rental loans for what evidence lenders take.
Credit
There is no income in the file, so credit carries more weight than it would on a conventional loan. Some programs in our lender network start at 620, and the strongest pricing sits at 740 and above. Each tier down costs something, usually in both rate and maximum leverage.
Lenders also look past the score. Recent late payments on a mortgage, a recent foreclosure or short sale, or a bankruptcy can matter as much as the number itself, and how long ago an event happened often decides whether it is a problem at all. If anything like that is in your history, say so up front so the file goes to a lender that will look at it.
Down payment and loan-to-value
Plan on typically 20-25% down on a purchase and 25% or more equity left in the property on a cash-out refinance. Put another way, purchase loans on many programs reach up to 80% of the value, and cash-out loans commonly up to 75%.
Leverage and the ratio pull on each other. A bigger down payment means a smaller loan, a lower payment and therefore a higher DSCR, which often improves pricing too. Lower credit, a lower ratio, a larger loan or certain property types can each bring the maximum LTV down. Loan amounts reach up to $5,000,000 depending on the program and property.
Reserves
Reserves are money you still have after closing, held in checking, savings or investment accounts. Budget roughly 3-6 months of the property's PITIA on top of the down payment and closing costs. Lenders set the exact figure, and it often rises with the loan size and the number of financed properties you hold.
On a DSCR cash-out refinance, many programs let the cash-out proceeds count toward reserves, which helps when most of your liquid funds are going into the next property. Confirm that with the specific lender before you plan around it.
Eligible property types
DSCR loans are for investment property only. You cannot live in the home. Within that, the eligible list is broad, but it varies by lender:
- Single-family rentals, which generally price best
- 2-4 unit properties
- Condos, including non-warrantable condos with several lenders, usually at lower leverage
- 5-8 unit residential and mixed-use (commercial portion under 50%) on some programs
- Short-term rentals on many programs, subject to local rules (see short-term rental loans)
- Condotels on some programs, though some lenders restrict specific projects
A single-family rental generally prices better than a 2-4 unit, a condo, a condotel or a short-term rental. The property also has to appraise, be insurable and be in rentable condition.
LLC vesting
Most DSCR investors close in an LLC, and the programs are built for it rather than treating it as an exception. Expect the lender to ask for the articles of organization, the operating agreement and the EIN, and for the members to sign a personal guaranty.
Closing in an entity does not remove that guaranty, and it does not by itself give you legal or tax protection. If the property is in your personal name now, a refinance is often a natural point to move it, subject to the lender's rules and your attorney's advice.
Documents you'll need
No personal tax returns, W-2s or pay stubs. The file still has to show who you are, what the property earns and that you can carry it:
- Photo ID and authorization for a credit check
- Bank or investment statements showing the down payment, closing costs and reserves
- The signed lease, or the appraiser's market-rent schedule (Form 1007) for a vacant unit
- For a short-term rental: platform or property manager revenue statements, or market data on select programs
- Insurance quote or declarations page, plus property tax and HOA figures
- Entity documents if closing in an LLC: articles, operating agreement, EIN
- On a refinance: the current mortgage statement and a 12-month payment history
- The purchase contract on a purchase, or settlement and renovation records if you are refinancing soon after buying
Seasoning for a cash-out refinance
Seasoning is how long you have owned the property before the lender will lend against its new value. Many DSCR programs allow a cash-out after about six months of ownership, using the new appraised value. Before that, some lenders cap the loan at what you paid plus documented renovation costs. If you bought the property with cash, delayed financing on select programs can return your funds soon after closing, provided the purchase is documented.
If your plan depends on a quick cash-out after a renovation, ask about seasoning before you buy. The DSCR cash-out refinance page covers sizing and seasoning in detail, and investment property refinance compares DSCR with conventional and bank statement options on a rental.
The no-minimum-DSCR option
If the rent doesn't cover the payment, the file isn't necessarily over. Select programs in our lender network carry no minimum DSCR at all up to 75% LTV. That suits a Florida rental where insurance eats the payment, a Texas rental with a heavy tax bill, a seasonal short-term rental, or a property bought for appreciation rather than day-one cash flow.
It is not a shortcut around underwriting. The property is still appraised, the rent is still documented, and your credit and reserves are still reviewed. What you trade is leverage and pricing: you generally stay at 75% LTV or below, the price is typically higher, and above 75% a lender-specific minimum ratio applies again. The full detail is on no-ratio DSCR loans.
Where the property is matters
8Twelve arranges DSCR financing in Florida and Texas, and in each state one line of the payment tends to decide the ratio. In Florida it's usually insurance, including windstorm and flood; see Florida DSCR loans. In Texas it's the property tax bill and any MUD or PID assessment; see Texas DSCR loans. For how the program works overall, start with DSCR loans, and check a specific address in the DSCR calculator before you write an offer.
Where a broker fits in
8Twelve is a mortgage broker, not a lender. DSCR requirements differ from one lender to the next, and only some lenders offer a no-minimum-ratio program, so where a file is placed often matters more than any single requirement. Send us the address, the rent and the deal, and we'll tell you which programs it fits and what each one costs.
