What Lenders Look for in a DSCR Loan Request

The Four Key Factors

Unlike conventional loans that focus heavily on personal income, DSCR lenders evaluate four primary factors to determine loan approval and terms.

1. DSCR Ratio

The most critical metric. Lenders want to see that rental income covers or exceeds debt obligations. Most require 1.0 minimum, with better rates at 1.25+.

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2. Credit Score

While 640 is the minimum, higher scores unlock better rates and terms. Scores above 700 typically get the most competitive pricing.

3. Reserves

Lenders want to see 6-12 months of PITIA reserves per property. This demonstrates financial stability and ability to weather vacancies.

4. Property Condition

The property must be in good condition with no major deferred maintenance. Appraisals can't show required repairs exceeding program limits.

How Rental Income is Evaluated

Lenders determine rental income using one of several methods depending on the property status:

Existing Lease: Current lease amount is used directly
Market Rent Appraisal: Appraiser provides market rent opinion
1007 Rent Schedule: Form 1007 from licensed appraiser
1025 Small Residential Income Property: For 2-4 units

What Can Hurt Your Application

• Recent bankruptcies or foreclosures
• DSCR below 1.0 without compensating factors
• Insufficient reserves for the property
• Major property condition issues
• Recent delinquencies on investment properties
• Unrealistic rent estimates not supported by market data

Maximizing Your Approval Odds

Work with an experienced capital advisor who can structure your deal properly, provide accurate rent estimates, and position your application to meet lender guidelines. Small changes in how a deal is presented can make the difference between approval and denial.

What Lenders Look for in a DSCR Loan