Who offers DSCR loans?
Debt-service coverage ratio loans are making life easier for property investors.
Investors can qualify using future rental income from the home they’re buying. Using the property’s income potential simplifies loan approval, especially for borrowers whose past income is hard to document.
One of the toughest parts of this financing type is finding a DSCR loan lender. This guide to DSCR lenders in 2022 can help.
What’s in this article?
DSCR loan lender guide 2022
DSCR loans are a niche product. The neighborhood bank or credit union probably won’t offer one.
The best DSCR loan lenders tend to specialize in non-QM loans — loans that aren’t regulated by a federal enterprise or agency.
The nation’s leading DSCR loan lenders include:
Marquee Funding Group
This California-based lender specializes in loans for investors, builders, and renovators in most states.
Like many DSCR loan lenders, Marquee funds its loans with private money. This gives the lender more freedom to assess each borrower as an individual.
The following DSCR loan guidelines apply to loans of $1 million or less:
- Loan-to-value ratio (LTV): Marquee will fund 75% of a home purchase for borrowers with credit scores between 620 and 659 (75% LTV requires a 25% down payment from the borrower). For credit scores above 660, Marquee can finance up to 80%.
- Lease requirements: The home you’re buying should have at least three months left on its lease agreement; however a month-to-month lease can work if the tenant submits a letter of intent to remain in the home.
- DSCR ratio: Marquee doesn’t publish this guideline, but most lenders prefer a debt-service coverage ratio of 1.25. This means the rental income on the new home must exceed the loan’s payment by at least 25%.
Would-be investors can get an online loan scenario with Marquee here.
This Atlanta-based lender offers non-QM loan products, including DSCR loans up to $1.5 million.
Angel Oak’s DSCR loans offer flexibility that can help more borrowers get approved. For example, investors can get 40-year loan terms with interest-only payments during an introductory period.
This strategy lowers monthly payments, which can raise the property’s debt service coverage ratio (DSCR). A higher DSCR, in turn, improves approval odds.
Angel Oak will also allow loans for VRBOs and other types of short-term rentals.
Get more information at Angel Oak’s site.
NewFi Lending offers DSCR loans along with traditional mortgages.
Like Angel Oak, NewFi has an interest-only option borrowers could stretch over 40 years to lower monthly payments, raising the loan’s DSCR.
NewFi doesn’t share much general information about qualifying for its DSCR loans. Instead, the lender prefers to discuss options with each individual borrower.
You can start the conversation here.
JMAC Lending can underwrite DSCR loans up to $3.5 million on properties with debt-service coverage ratios as low as 1.0.
Properties with DSCRs below 1.0 can qualify for loans to $3 million. A DSCR below 1.0 means the mortgage payment exceeds the home’s monthly rental income.
JMAC approves these types of loans only for borrowers with credit scores of 700 or higher, and only if the borrower has a year’s worth of cash to cover mortgage payments if needed.
Borrowers with lower credit scores — as low as 620 — can still get DSCR loans up to $2 million — if they can put 35% down. JMAC also has stricter guidelines for buying un-leased properties.
Learn more about JMAC’s loan programs for investors here.
Finance of America
Finance of America has a DSCR program designed especially for first-time investors. The lender calls this product a “single rental loan.”
These loans can reach up to $2 million, and it’s possible to borrow with a sub-1.0 DSCR if you have cash reserves — along with cash for a 25% to 35% down payment.
Of course, buyers with higher credit scores, a higher DSCR, and higher down payments have the best approval odds and access to the best DSCR rates.
There is one stipulation to know about: Even though it specializes in helping inexperienced investors, Finance of America won’t approve a DSCR loan for a first-time home buyer.
See more details, including FAQs about Finance of America’s single rental loan, here.
American Heritage Lending
American Heritage Lending offers a variety of non-QM mortgages for real estate investors.
The lender can approve DSCR loans up to $2 million on 30-year fixed rate loans. Borrowers could use an interest-only option, during an introductory period, to increase the property’s DSCR.
American Heritage’s DSCR loan will finance up to 80% of a rental home for many investors, requiring only 20% down.
Some borrowers can get same-day approval and funding within days, according to American Heritage’s website.
This Florida-based lender can approve DSCR loans up to $5 million for some borrowers. Actual loan size can vary based on credit score, cash reserves, and the property’s DSCR.
Minimum requirements for approval include:
- A credit score of 620
- A DSCR of 1.0
- 20% down
Coast2Coast can finance VRBOs and other short-term rental properties.
This lender prefers one-on-one conversations between investors and loan officers. You can find contact information on its website.
Griffin Funding can approve a property with a DSCR as low as 0.75. This means the mortgage payment would exceed the home’s rental income.
To get approved, the borrower would need a year’s worth of mortgage payments in savings. Griffin would also require a 30% down payment and a credit score of 720 or higher.
These are adjustable-rate mortgages with a three-year introductory period. After that, the rate changes every six months based on the Secured Overnight Financing Rate (SOFR). Griffin can offer interest-only payment options during the loan’s three-year intro period.
Loan sizes can reach $5 million for some borrowers. And, the lender has programs for AirBNB, VRBO, and short-term rental properties.
See more details on the lender’s website.
Truss Financial Group
Truss Financial Group is a mortgage broker that focuses on self-employed borrowers who have a hard time documenting their income via tax returns for a traditional lender. DSCR loans fit squarely in Truss’s wheelhouse.
The group can help borrowers close DSCR loans up to $3 million with 30-year fixed rates and debt-service coverage ratios of 1.0 or higher.
Truss could also help sub-1.0 DSCR properties get approval if there’s already a tenant in the home — and if the borrower has excellent credit and at least 25% down.
Truss prides itself on helping self-employed borrowers. You can learn more here.
First Florida Financial Group
Borrowers need FICO scores of 660 or higher, loan amounts of $3 million or smaller, and down payments of at least 20%.
First Florida won’t approve a DSCR loan for a multi-unit property — only single-family residential units. To get approved, the borrower should have enough in savings to cover at least two monthly mortgage payments.
The lender’s website, E Zip Mortgage, offers an online quoting process.
Finding the right outside-the-box solution
More and more investors like DSCR loans because this financing depends more on the property — and less on the borrower.
DSCR loans offer an outside-the-box way to become a landlord or to expand your portfolio of rentals.
A conversation with the right DSCR loan lender could be your first step to unlocking your potential as an investor.