DSCR Loans Louisiana Financing Insights for Investors
9 minute read
December 4, 2022


Louisiana is rich in culture, cuisine, history, and music, making it a natural next step for many real estate investors.

To take advantage of the plentiful opportunities in this beautiful state, investors are turning to debt service coverage ratio (DSCR) loans.

Rather than requiring strict personal income documentation like traditional lending options, DSCR loans allow investors to qualify based on the investment property’s income.

This opens up possibilities for investors by simplifying and speeding up the application process. Let’s take a look at how investors can take advantage of DSCR loans in Louisiana.

Submit your DSCR loan scenario.

What’s in this article?

Why get a DSCR loan in Louisiana?
How does a DSCR loan work?
How to calculate DSCR
Minimum DSCR to qualify
Louisiana DSCR loan guidelines
DSCR mortgage rates Louisiana
5 best areas to invest in Louisiana
5 tips for Louisiana investors
Submit your DSCR scenario

Why get a DSCR loan in Louisiana?

Louisiana has a low cost of living and cost of doing business, making it a prime location for growth and opportunity.

New investors or investors looking to try out an entirely different market will delight in Louisiana’s affordability and demand for quality housing.

A DSCR loan can help you make a difference in the state by offering a simple lending solution that’s based on a property’s income potential rather than your own personal income documentation.

Investors often have trouble qualifying for a loan with a traditional lender because they have strict income requirements, and request pay stubs and W2s.

A DSCR loan is largely based on a simple equation that compares the potential income and monthly payment.

How does a DSCR loan work?

If you’ve had trouble qualifying for a loan in the past because you can’t prove your true income, a DSCR loan may be right for you.

With a DSCR loan, it’s not about your finances, but the potential of your investment property. To qualify for a DSCR loan, your property’s income must exceed the payment amount.

See if you’re eligible for a DSCR loan.

How is DSCR calculated?

Calculate your property’s DSCR with the following equation:

DSCR = Income / Payment

The answer is expressed in a decimal format, and ideally is no lower than 1.25 or 1.25x. This means the property makes 25% more income than the monthly payment amount.

For example, if your property’s income is $1,800 a month and your monthly payment amount is $1,200, your DSCR equals 1.5.

Determining DSCR income

DSCR income for residential properties is just the monthly rental income. For commercial properties, you would use net operating income (NOI), which is your income minus costs of operating the property.

Determining DSCR payment

The DSCR payment amount is your PITIA, which equals your principal, interest, taxes, insurance, and association fees.

A DSCR lender will help you determine the accurate payment amount.

Example: How higher rent can improve DSCR


Example: How lower payment can improve DSCR


Tip: Notice how adjusting the rent and payment amounts influences the DSCR. As you research properties, manipulate the income and payment to achieve your ideal DSCR.

What is the minimum DSCR to qualify in Louisiana?

The minimum DSCR most lenders will accept in Louisiana is 1.25x, but you’ll find that many lenders are flexible.

Some don’t require a minimum, while others may want to see a higher DSCR. Try and get your DSCR as high as possible — especially if you’re a new investor — for the best chance of approval.

Related: DSCR Loan Pros and Cons

DSCR Loan guidelines and fast facts. All about Debt Service Coverage Ratio loans.

Louisiana DSCR loan guidelines

Each lender will have slightly different requirements for DSCR loans, but you’ll find that overall the process is much faster and simpler.

You don’t have to rely on your personal income or taxes to qualify, which is a huge relief for many types of borrowers.

Instead, make sure you have a DSCR of at least 1.25x, and check out the following additional requirements for loan-to-value ratio, credit score, and more.

Loan-to-value (LTV): The max LTV for DSCR loans usually is around 75-80%, meaning you can expect to put down at least 20-25% on the property.

Credit score: Make sure you have a credit score of at least 640, but this will vary by lender. Some may want to see higher scores, and some may allow lower scores.

Verifying the property’s future rental income: An appraiser will need to verify the property’s future rental income by filling out Form 1007, Fannie Mae’s Single-Family Comparable Rent Schedule.

Loan purpose: Typical DSCR loan purposes in Louisiana include purchase, refinance, or cash-out refinance.

Property types allowed: Properties include single-family, 2-4 units, townhomes, condos, and condo hotels. Some lenders also allow 5+ unit apartment complexes, office buildings, and other commercial properties.

Property use: DSCR property uses include investment/rental only and short-term and long-term rentals.

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  • Most competitive rates in the U.S.
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Loan type: The most common DSCR loan type is the 30-year fixed-rate, but many lenders also allow adjustable rates and interest-only loans.

Income and employment, debt-to-income (DTI) ratio: DSCR lenders in Louisiana don’t need to calculate your DTI or see income or employment verification documents. Instead, they will calculate your DSCR using the property’s income and your monthly payments.

Maximum loan amount: Max loan amounts generally are in the millions of dollars. A common max amount is $1-$5 million, but some may allow more or less.

Maximum properties owned: DSCR lenders generally do not limit the number of properties you can own.

Prepayment penalties: Most DSCR loans do have prepayment penalties for selling the property, repaying the loan, or refinancing too quickly.

Cash reserves: You should expect to have 6-12 months of reserves for the full PITIA payment, although the requirements vary by lender and your DSCR.

Closing in the name of an LLC: You can close in the name of an LLC with most Louisiana DSCR lenders.

Seller-paid closing costs: This generally is allowed up to a certain amount.

See if your deal meets DSCR requirements.

DSCR mortgage rates Louisiana

DSCR mortgage rates in Louisiana are usually only about 1-2% higher than conventional loans, which is fairly comparable considering this is an alternative lending solution.

Many borrowers find the slightly higher rates worth it, so they can acquire the financing they need with less documentation.

The five best areas to invest in Louisiana

Louisiana is a beautiful state with numerous investment options, but some areas are primed for real estate opportunities. Let’s take a look at the 5 best areas to invest in Louisiana in 2023.

1. New Orleans

New Orleans is a popular tourist destination with pricey real estate. Rich in culture, cuisine, and endless amounts of entertainment, your prospects are good when investing in real estate in this dynamic city.

2. Lake Charles

Lake Charles is packed with activity, from dozens of galleries and museums to golfing, festivals, and casinos. It’s also a top retirement community, so inventors have a variety of property options to choose from to meet the needs of residents and visitors alike.

3. Baton Rouge

Baton Rouge is the second-largest city in Louisiana, with dozens of exciting career options due to the mix of industries taking root.

4. Lafayette

Lafayette was once rated the happiest city in America and is the center of the oil and natural gas industry in Louisiana.

It has also been recognized as one of the best cities for businesses and careers, leaving room for a range of real estate investment opportunities that will be supported by a variety of industries.

5. Shreveport

Shreveport is home to several universities and industries, making it a well-rounded location for successful real estate investments.

The city is also packed with activities, including outdoor adventures with alligators, art galleries, beautiful gardens, and popular festivals.

Five tips for real estate investors in Louisiana

Even if you’re an experienced investor, it’s worth it to consider the area you’re investing in and how to make the most of your investment.

1. Take your time, and do your research

Louisiana is packed with opportunities. Make sure you understand your unique goals as an investor and choose opportunities that align with these goals.

Do you want to invest in office spaces in a city like Lafayette? Fix up single-family properties for rent inside or outside of New Orleans? Buy a beautiful retirement complex in Lake Charles?

No state’s opportunities are cut-and-dry. Make your investments work for you and the residents.

2. Build an unbeatable local real estate team

Even if you’re from Louisiana, make sure you’re consulting with local experts such as real estate agents who have experience with investor needs.

Also, touch base with lawyers who can help you understand local and state laws.

3. Determine from the start whether you want to be a landlord

Most real estate investors hire professional management companies for their properties. This gives you time to focus 100% on your investments, while the company can handle the day-to-day issues and ins and outs of your individual properties.

Louisiana is considered a landlord-friendly state and has a huge rental market, making self-managing a bit easier if you choose that route.

4. Consult with a DSCR lender to help you make the best decisions

If you’re new to DSCR lending, it can be helpful to get in contact with a DSCR lender in Louisiana as soon as possible, even if you haven’t found your property.

Your DSCR lender can help you understand what you’re looking for in a property, so you can get the highest DSCR — and the highest chance of getting your loan approved.

5. Understand hurricane season

Louisiana has unfortunately faced its share of hurricanes and severe storms. In any area you’re researching, take extra note of weather patterns and how the area is affected by hurricanes. Learn what protections you should have in place in the event that a storm does occur.


How much do you have to put down for a DSCR loan?

Lenders generally require that you put down at least 20-25% for a DSCR loan in Louisiana.

Can I live in a home with a DSCR loan?

DSCR loans are generally only used for investment properties, not primary residences.

Is DSCR hard money?

DSCR loans are not hard money loans, but some hard money lenders offer DSCR loans. The most common DSCR loan is the 30-year fixed-rate and is not meant to be short-term financing like hard money loans.

Does the DSCR calculation include taxes?

DSCR generally takes into account your principal, interest, taxes, insurance, and association fees, if applicable.

Submit your DSCR scenario to start

DSCR loans can help you quickly fund your Louisiana investment properties by focusing on your property’s income over your own finances. Submit your DSCR scenario to get started.

Submit your DSCR loan scenario.
  • Top-rated landlord insurance
  • Get a quote in minutes
  • Protect your rentals
  • Most competitive rates in the U.S.
  • *We may be compensated if you purchase through this link
  • Top-rated landlord insurance
  • Get a quote in minutes
  • Protect your rentals
  • Most competitive rates in the U.S.
  • *We may be compensated if you purchase through this link

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.

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