DSCR Loan Qualification Checklist

Everything you need to know before applying for a DSCR loan — from property requirements to documentation to common mistakes that cost investors money.

1Property Requirements

Investment property (not owner-occupied — most lenders require a signed letter of intent to rent)
Property must be residential: single-family, 2-4 unit, condo, or townhome
Property must generate (or be projected to generate) rental income
Minimum property value typically $100K+ (varies by lender)
Property must be in rentable condition — no major structural issues

2Financial Qualification

DSCR ratio of 1.0x or higher (most lenders prefer 1.25x+)
DSCR = Monthly Rent / Total Monthly Debt (PITIA: Principal + Interest + Taxes + Insurance + Association dues)
Minimum credit score: typically 660+ (some lenders accept 620 with rate adjustments)
Down payment: 20-25% minimum for purchase (some allow 15% with higher rates)
Cash reserves: 6-12 months of PITIA payments in liquid assets
No income documentation required — qualification is based on property cash flow, not personal income

3Documentation Checklist

Government-issued photo ID
Proof of funds for down payment and reserves (bank statements, investment account statements)
Current lease agreement OR market rent analysis (1007 rent schedule from appraiser)
Entity documents if purchasing through LLC (operating agreement, EIN letter, articles of organization)
Proof of insurance (or binder for insurance)
Purchase contract (for purchases) or current mortgage statement (for refinances)
Property tax records

4Loan Terms to Compare

Interest rate (fixed vs. adjustable — get quotes for both)
Loan term: 30-year fixed is standard; some offer 5/1, 7/1, or 10/1 ARMs
Prepayment penalty: 3-5 year stepdown is common (e.g., 5-4-3-2-1%). Negotiate this.
Origination fees: typically 1-2% of loan amount
Minimum DSCR requirement: 1.0x, 1.1x, or 1.25x (lower DSCR = higher rate)
Rate buydown options: some lenders offer 0.25-0.5% rate reduction for upfront fee
Maximum loan-to-value (LTV): typically 75-80%
Seasoning requirements for cash-out refinance: typically 6-12 months

5Common Pitfalls to Avoid

Only applying with one lender — rates vary 1-2% across lenders. Always compare 3+.
Overestimating rental income — use actual lease rates or conservative market comps, not optimistic projections
Forgetting to factor in vacancy, repairs, and property management (typically 10-15% of gross rent)
Ignoring prepayment penalties — if you plan to sell or refinance within 5 years, negotiate shorter terms
Not having reserves ready — most lenders verify reserves before closing
Purchasing in an LLC without lender awareness — some DSCR lenders require personal guarantee regardless
Skipping the appraisal review — ensure the appraiser uses appropriate rental comps for your market

6Before You Apply

Run your numbers using a DSCR calculator to estimate your ratio
Get a market rent analysis for the property (or review comparable rentals)
Verify your credit score and address any errors
Organize your entity documents if purchasing through an LLC
Have your proof of funds and reserves in one account for easy documentation
Research 3-5 DSCR lenders and compare their published terms

Ready to See If You Qualify?

Use our free DSCR calculator to estimate your ratio, then get matched with investor-friendly lenders who can give you real quotes.

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1Property Requirements

Investment property (not owner-occupied — most lenders require a signed letter of intent to rent)

Property must be residential: single-family, 2-4 unit, condo, or townhome

Property must generate (or be projected to generate) rental income

Minimum property value typically $100K+ (varies by lender)

Property must be in rentable condition — no major structural issues

2Financial Qualification

DSCR ratio of 1.0x or higher (most lenders prefer 1.25x+)

DSCR = Monthly Rent / Total Monthly Debt (PITIA: Principal + Interest + Taxes + Insurance + Association dues)

Minimum credit score: typically 660+ (some lenders accept 620 with rate adjustments)

Down payment: 20-25% minimum for purchase (some allow 15% with higher rates)

Cash reserves: 6-12 months of PITIA payments in liquid assets

No income documentation required — qualification is based on property cash flow, not personal income

3Documentation Checklist

Government-issued photo ID

Proof of funds for down payment and reserves (bank statements, investment account statements)

Current lease agreement OR market rent analysis (1007 rent schedule from appraiser)

Entity documents if purchasing through LLC (operating agreement, EIN letter, articles of organization)

Proof of insurance (or binder for insurance)

Purchase contract (for purchases) or current mortgage statement (for refinances)

Property tax records

4Loan Terms to Compare

Interest rate (fixed vs. adjustable — get quotes for both)

Loan term: 30-year fixed is standard; some offer 5/1, 7/1, or 10/1 ARMs

Prepayment penalty: 3-5 year stepdown is common (e.g., 5-4-3-2-1%). Negotiate this.

Origination fees: typically 1-2% of loan amount

Minimum DSCR requirement: 1.0x, 1.1x, or 1.25x (lower DSCR = higher rate)

Rate buydown options: some lenders offer 0.25-0.5% rate reduction for upfront fee

Maximum loan-to-value (LTV): typically 75-80%

Seasoning requirements for cash-out refinance: typically 6-12 months

5Common Pitfalls to Avoid

Only applying with one lender — rates vary 1-2% across lenders. Always compare 3+.

Overestimating rental income — use actual lease rates or conservative market comps, not optimistic projections

Forgetting to factor in vacancy, repairs, and property management (typically 10-15% of gross rent)

Ignoring prepayment penalties — if you plan to sell or refinance within 5 years, negotiate shorter terms

Not having reserves ready — most lenders verify reserves before closing

Purchasing in an LLC without lender awareness — some DSCR lenders require personal guarantee regardless

Skipping the appraisal review — ensure the appraiser uses appropriate rental comps for your market

6Before You Apply

Run your numbers using a DSCR calculator to estimate your ratio

Get a market rent analysis for the property (or review comparable rentals)

Verify your credit score and address any errors

Organize your entity documents if purchasing through an LLC

Have your proof of funds and reserves in one account for easy documentation

Research 3-5 DSCR lenders and compare their published terms