DSCR Loan Qualifications and DSCR Mortgage Program Requirements

Debt-Service Coverage Ratio

Your business may be able to pay back its short-term debt obligations in cash with a DSCR loan.  We will help you understand how you can be approved for a DSCR loan.

If you have a business that has generated and has the potential to generate enough income to pay a DSCR loan facility back, this type of loan may be your best option.

Once you understand how your DSCR impacts how you can be approved for a DSCR loan, you will be able to be kept abreast of the best time to apply for loan facilities.

How DSCR Loan Works

You can get a DSCR loan in flexible terms as long as your debt service coverage ratio is high enough to indicate that you will be able to pay back your loan with interest.

If you have a rental property, the rental income that your property generates should meet the requirements, especially the coverage ratio requirement.  To determine the coverage ratio requirement, the monthly rental income is divided by the mortgage payment.

A good ratio ranges from 1.0 to 1.5.  The amount of loan that will be approved is based on the mortgage rate and loan program. Sprint Funding offers a streamlined process for DSCR loans which makes it easier to apply for compared to other types of loans.

To compute the Debt Service Coverage Ratio (DSCR), the equation used is:

Debt Service Coverage Ratio (DSCR) = Net Operating Income/Debt Service

The Debt Service is determined by adding Interest and Lease Payments and Principal Repayments.

The process does not include or require a statement of your personal income, tax returns, and other financial documents required by standard loan types.  

Since a DSCR loan is obtained for mostly real estate investment properties, all we need is the assurance that your property will generate more income than is needed to pay your DSCR loan.

DSCR Loan Borrower Qualification Guidelines

We have made it simpler for our clients to avail of a DSCR loan.  As a borrower, you will need to comply with these important components to be qualified for a DSCR loan:


The value of the property in question should be able to generate net positive income.  This assures us that the expected income or rental sales will be enough to pay the loan. 

Important considerations when determining if the property will be able to generate positive cash flow includes:

  1. The Existing Market and Competitors:  You can get a projected amount of income by knowing the market conditions of rental properties or real estate properties where your property belongs.  This will let you know about the specific range of loan amounts that your property will be able to pay when you get a DSCR loan.
  2. Rental Price Per Month:  Identify the rental price per month for the property in question for the DSCR loan.  It is important to note the changes that are expected to occur in the rental or real estate markets that impact the rental prices per month.

When the DSCR is calculated, the net operating income or debt obligations is included.  The Net Operating Income (NOI) is computed using the equation:

  1. Net Operating Income = Revenue – COE (Certain operating expenses)
  2. It is computed using EBITDA (earnings before interest, tax, depreciation, and amortization)

Expenses and Utilities

The monthly expenses and utilities should not be too much to affect how you will be paying monthly dues for your DSCR loan.  Some of the expected expenses of a property that will be considered when you apply for a DSCR loan are:

  1. Basic utilities
  2. Mortgage
  3. Taxes
  4. Property management


Debt-Service Coverage Ratio Loans Interest Rates

The interest for a DSCR loan is computed depending on the loan situation.  Some lenders set a specific loan interest amount but we provide flexibility that depends on the cash flow from the property.  

Coverage Ratio

The ideal coverage ratio for a DSCR loan application to be approved is 1.25 to 1.5.  This means that the actual or projected monthly rental income must be at least equal to 1.25 to 1.5 of the mortgage payment.

You can have a lower coverage ratio if you are willing to make a down payment of at least 30%.

Property Eligibility

Some loan offices offer DSCR loans for multiple types of properties, even those that are not typically allowed with standard investment property loans. Some also don’t limit the total number of rental properties you have financed.  This will allow you to be able to grow your property portfolio faster.

DSCR Program Rates, Costs, and Fees for a Qualified Property

Required fees and costs for a qualified property for a DSCR loan include:

  1. Origination Fee (0.5% to 1.0% of the total loan amount)
  2. Appraisal Fee (Ranges from $300 to $500)
  3. Rate of Mortgage (1% to 2% higher than rates of typical investment properties)
  4. Closing Expenses such as lender, appraisal, title, and escrow fees
  5. Other fees like title insurance and escrow fees

You can talk to a loan expert from Sprint Funding today to know the specific rates and fees, including the maximum mortgage amount allowed for a DSCR loan.

Apply for a DSCR Loan Today

If you are planning to buy or refinance an investment property any time now and you do not have enough personal income to finance such an endeavor, you are a good candidate for a DSCR loan.

Sprint Funding offers a streamlined process for having a DSCR loan application approved quicker than other standard loan types for property investment.  We will not require your tax, financial, and employment records.  All we need is information about your investment property with the estimated rental income.

When your property is approved for a DSCR loan, we will provide you with a loan estimate that includes the interest rate, monthly payment, and closing costs.

Give us a call today at 760-849-4475 or for any questions about our loans, feel free to fill out our form