Most DSCR loans that get denied were never really deals. They were unprepared files. I work with investors every day, I have funded over $50 million in these loans, and the pattern is almost always the same. Someone finds a property, gets excited, sends it in, and then gets blindsided by something they could have checked in ten minutes up front. A DSCR loan is simpler than a regular mortgage because we are mostly looking at the property itself and whether the rent covers the payment. Simple does not mean nothing gets checked. Here is the short list I run on every deal before I submit.
Rent that covers the mortgage at a 1.0 ratio or better. That ratio is just the rent divided by the full mortgage payment. If it is not there yet, I want a clear path to get it there.
Clean payment history on every mortgage you already have. One recent late payment can change your terms or sink the file.
A credit score of 640 or higher. You can qualify at 640, and the terms keep getting better the higher you climb.
Six months of reserves sitting in a US account after closing. Reserves are just money left over to cover the payment if a tenant moves out.
Proof of the rental income if the place is already rented. A lease or a few months of deposits usually does it.
Run all five before you fall in love with a property, and the underwriter has almost nothing left to surprise you with. That is the whole game. The investors who close fast are not lucky and they are not special. They just did the boring prep work before anyone asked for it. When I watch a file fall apart, it is usually because one of these five got skipped, and by then the seller is nervous and the clock is running. Check them first and most of the drama disappears.
If you are looking at a specific property, send me the numbers and I will run all five with you before you commit to anything. No pressure, just a real read on whether it actually works. You can grab a time here:
I was recently featured on the Icons of Real Estate Podcast where we broke down how DSCR loans let you scale on the property’s income instead of your tax returns, how second-position HELOCs close in 1-2 weeks on LLC-held properties without touching the 3% rate you locked in, and the credit, assets, and reserves you should have lined up before you buy anything.
Watch the full episode here:
Watch: The NEW Way To Buy Your First Rental and learn how lenders really calculate DSCR loans and why rent, appraised market value, credit score, and loan structure determine how much you can borrow on your next rental property.
Ben Stef, Mortgage Advisor | NMLS# 2018674
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