Most lenders require a DSCR of at least 1.0, meaning the rental income must cover the property’s debt payments. Some lenders may prefer a DSCR of 1.25 for added cushion.

1. Single-Family Homes (SFRs) Description: Standalone residential properties rented to a single tenant or household.
Why It Qualifies: Single-family homes are popular among real estate investors for their consistent demand and easier management.
Examples: Suburban houses, urban rental homes.

2. Multi-Family Properties Description: Residential buildings with multiple units, typically ranging from 2 to 4 units.
Why It Qualifies: Multi-family properties generate multiple streams of rental income, reducing risk.
Examples: Duplexes, triplexes, quadplexes.

3. Condominiums Description: Individually owned units in a shared building or complex.
Why It Qualifies: Condos are often purchased for long-term or short-term rental opportunities.
Considerations: Some lenders may require HOA approval or additional due diligence on the condo association.

4. Townhomes Description: Attached residential properties, typically sharing walls with adjacent units.
Why It Qualifies: Townhomes are affordable investments with high rental appeal, especially in growing urban areas.

5. Short-Term Rentals (STRs) Description: Properties rented for short durations, often on platforms like Airbnb or VRBO.
Why It Qualifies: STRs can yield high income, but lenders may require proof of rental income or market rent estimates.
Examples: Vacation homes, city apartments.

6. Small Apartment Buildings Description: Multi-family properties with 5+ units but still considered smaller than large apartment complexes.
Why It Qualifies: These properties produce higher rental income and are attractive for scaling investment portfolios.

7. Mixed-Use Properties Description: Buildings combining residential and commercial spaces.
Why It Qualifies: Eligible if the residential component generates sufficient rental income (e.g., apartments above retail shops).
Considerations: Some lenders may limit the commercial space to a percentage of the total building area (e.g., ≤25%-50%).

8. Portfolios of Rental Properties Description: A collection of multiple rental properties, often financed together under one loan.
Why It Qualifies: Portfolio loans streamline the financing process for investors managing multiple properties.

9. Manufactured Homes Description: Prefabricated homes installed on permanent foundations and titled as real property.
Why It Qualifies: Eligible if the home is in a stable rental market and meets lender requirements for age and condition.

10. Vacation Homes Description: Second homes are rented out seasonally to vacationers.
Why It Qualifies: Can qualify if the property demonstrates strong seasonal rental income potential.

11. Student Housing Description: Properties located near colleges or universities rented to students.
Why It Qualifies: Demand remains consistent in areas with high student populations.

While most income-generating properties qualify, the following may need additional review or conditions:

- Properties in Rural Areas: May require market rent evaluations to confirm demand.
- Non-Traditional Properties: Converted homes, tiny homes, or unique properties may require additional appraisals or alternative documentation.
- Distressed Properties: Eligible if they will be stabilized and generate income post-renovation (often combined with a Rental Hold Loan).

Rental DSCR loans are for investment purposes only, meaning the following are typically ineligible:
- Owner-Occupied Properties: Not allowed, as DSCR loans focus on rental income.
- Vacant Land: Requires construction or development financing.
- Properties Without Income Potential: Lenders require proof of current or market rent.

Yes, lenders can use market rent estimates from a property appraisal report to calculate DSCR, even if the property is vacant.

Many DSCR loans include prepayment penalties, 3% 1st year, 2% 2nd year, 1% 3rd year, Other options available, We now offer a no prepayment penalty option! The specifics depend on the lender and loan terms. Contact us for more info!

The interest rates for Rental DSCR Loans typically fall within a range of 8% to 12%, depending on several factors. These rates are generally higher than those for conventional mortgages because DSCR loans are considered riskier due to their reliance on property cash flow rather than the borrower’s personal income

Yes, many lenders allow DSCR loans for short-term rentals. However, they may require proof of income from platforms like Airbnb or use market rent estimates for underwriting.

Yes, DSCR loans can be used for rate-and-term refinances or cash-out refinances. Cash-out refinances may have stricter DSCR and LTV requirements.

Not always. While some lenders prefer borrowers with experience managing rental properties, others are willing to work with first-time investors.

Operating expenses (e.g., taxes, insurance, HOA fees) reduce the net operating income (NOI), which can lower your DSCR. Keeping expenses low can improve your chances of qualifying.

If your DSCR is below 1.0, lenders may offer alternatives such as a lower loan amount, higher interest rates, or requiring additional reserves.

Yes, most lenders offering DSCR loans operate nationwide, but availability may vary by state and lender.

Once approved, rental income changes won’t typically affect your existing loan. However, if you plan to refinance or apply for additional DSCR loans, your new cash flow situation may impact future approvals.