Get Expert Investment Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Introduction: Why California Investors Are Turning to DSCR Loans
California is known for its high property values, dynamic rental markets, and investment opportunities across urban, coastal, and suburban areas. But it’s also known for strict lending standards, high entry costs, and income documentation headaches.
That’s why DSCR loans (Debt Service Coverage Ratio loans) are gaining traction among real estate investors in California.
These loans let you qualify based on rental income—not personal income, tax returns, or W2s. Whether you’re buying a triplex in Sacramento, refinancing a short-term rental in Palm Springs, or expanding your portfolio in Los Angeles, DSCR loans make it easier to navigate California’s competitive market.
What Is a DSCR Loan? A Quick Refresher
A DSCR loan evaluates the cash flow of the rental property, not your job, credit card debt, or adjusted gross income. If the property generates enough rent to cover its mortgage, you’re more likely to be approved.
DSCR Formula:
DSCR = Monthly Gross Rent ÷ Monthly PITIA
(PITIA = Principal + Interest + Taxes + Insurance + HOA if applicable)
✅ Most lenders look for a DSCR of 1.0–1.25+, meaning the rent fully covers (or exceeds) monthly obligations.
Why DSCR Loans Make Sense in California
✅ Income-Based Approval
With high home prices and self-employed buyers, California is full of investors who can’t easily qualify for traditional mortgages. DSCR loans solve that problem.
✅ LLC-Friendly Financing
DSCR loans can be made to LLCs, allowing you to separate business from personal finances—essential for risk management in a litigious state like California.
✅ Short-Term Rental Viability
Cities like Joshua Tree, Big Bear, and Palm Springs offer great STR potential. Many DSCR lenders accept AirDNA-based income projections for qualification.
✅ Fast Closings in Competitive Markets
DSCR loans often close in 3–5 weeks, giving investors a competitive edge in hot markets like LA and the Bay Area.
Top Markets in California for DSCR Loan Investing
Sacramento
- Median Price: ~$495,000
- Avg. Rent: ~$2,400
- Strong cash flow potential and lower barrier to entry
Los Angeles
- Median Price: ~$850,000
- Avg. Rent: ~$3,200
- Ideal for multi-units, house hacks, and STR/MTR strategies
San Diego
- Median Price: ~$825,000
- Avg. Rent: ~$3,000
- Vacation rental demand + military renters = solid income base
Palm Springs / Joshua Tree
- STR hotbeds with year-round tourism
- Many lenders accept AirDNA projections in these markets
Fresno, Bakersfield, Inland Empire
- Lower home prices, stable rents, and landlord-friendly regulations (compared to LA/SF)
California DSCR Loan Requirements (Typical Guidelines)
| Requirement | Typical Range |
| Credit Score | 660–680+ |
| Down Payment | 20–30% |
| DSCR Ratio | 1.0–1.25 (some allow <1.0 with offsets) |
| Loan Amount | $150K–$5M+ |
| Ownership Type | LLC or personal |
| Reserves | 6–12 months of PITIA |
| Closing Time | 3–5 weeks |
💡 Tip: The higher the DSCR and credit score, the more leverage and better rate you’ll receive.
Can You Use a DSCR Loan for STRs in California?
Yes—but STR-friendly zoning is crucial. Some cities have heavy restrictions, while others embrace vacation rentals.
Top DSCR-STR Markets in CA:
- Joshua Tree
- Palm Springs
- Big Bear Lake
- San Diego (select areas)
- Lake Tahoe
- Temecula
- Desert Hot Springs
Lender Requirements May Include:
- STR permit (if required)
- AirDNA income projections
- Booking history (if existing STR)
- Management agreement (or self-managed plan)
✅ Many California DSCR lenders will qualify based on projected Airbnb income if supported by market data.
Real-World Example: DSCR Loan for a Fourplex in San Diego
Investor: Melissa, full-time real estate agent and investor
Property: $1.2M fourplex in San Diego
Combined Rent: $11,200/month
PITIA: $8,500/month → DSCR = 1.32
Outcome:
- 25% down
- No W2s or DTI ratio required
- Closed in LLC within 30 days
- Refi planned in 12 months after raising rents
Top DSCR Lenders Active in California (2025)
- Visio Lending
- Lima One Capital
- CoreVest (California-based)
- Angel Oak Mortgage
- New Silver
- Kiavi
- Easy Street Capital
Each lender varies in terms of:
- Minimum DSCR allowed
- LLC and STR rules
- Prepayment penalties
- Loan amounts and rate tiers
Tips to Get Approved for a DSCR Loan in California
- Target cash-flowing neighborhoods with solid rent-to-price ratios
- Use AirDNA or Rentometer to justify rental income
- Get a Form 1007 Rent Schedule with your appraisal
- Keep credit above 680 for best terms
- Show 6–12 months of reserves
- Avoid cities with heavy STR restrictions unless going long-term
Final Thoughts: Scale Your California Portfolio with DSCR Loans
California may be a challenging market—but it’s also one of the most rewarding. With strong rents, diverse demand, and high equity growth, the Golden State remains a prime location for savvy investors.
With a DSCR loan, you can finance properties based on rental income—not tax returns or personal income statements. Whether you’re entering the STR market in Palm Springs or scaling with multi-units in Sacramento, DSCR loans offer the flexibility, speed, and structure investors need in California’s complex environment.
Get Expert Investment Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
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.
