Discover What Banks Do DSCR Loans: Your Ultimate Guide for 2024

When seeking financing for an investment property, savvy investors often turn to Debt Service Coverage Ratio (DSCR) loans. But what banks do DSCR loans? This guide provides a direct answer to that question, introducing the top banks like Bank of America, Wells Fargo, and others who offer DSCR loans tailored to real estate investors. We’ll explore how these loans work, why they’re a go-to financial solution for those looking to leverage property cash flows, and what to expect regarding eligibility and terms.

Key Takeaways

  • DSCR loans cater to investment properties by using the Debt Service Coverage Ratio to assess the eligibility for a loan based on property cash flow instead of the borrower’s personal financial information, with larger financial institutions and private lenders offering these loans.

  • The qualifying criteria for a DSCR loan typically necessitate a fully operational income-generating property and a minimum DSCR threshold set by lenders, usually between 1.2 and 1.25, which influences loan approval and terms.

  • To boost the likelihood of DSCR loan approval, borrowers should maintain a healthy credit score, ensure strong property cash flow, and have accurate and comprehensive documentation ready, as these factors significantly impact loan terms and interest rates.

Understanding DSCR Loans

Illustration of a real estate property with cash flow

In a nutshell, DSCR loans are investment property loans that base their focus on the cash flow of an investment property. The DSCR or Debt Service Coverage Ratio is a measure of a property’s ability to generate enough income to cover its debt obligations. Unlike conventional loans, these loans do not require any personal financial information. Applications are heavily based on the Debt Service Coverage Ratio of the investment property. This makes the process less about the borrower’s income and more about the property’s cash flow.

Real estate investors, self-employed individuals, and owners of multiple investment properties are the primary users of DSCR loans. This is because these loans can be used to purchase a variety of rental properties such as:

  • single-family homes

  • 1-4 unit properties

  • vacation homes

  • some commercial or multi-family properties

However, to be eligible for a DSCR loan, properties should already be fully operational, income-generating assets, and not used for owner-occupied residences or speculative projects like rental property construction.

DSCR loan companies look for the investment property income to be sufficient to cover the debt repayments. A DSCR loan typically requires a minimum amount of $100,000 to initiate the application process. This minimum threshold ensures that the loan aligns with the specific requirements of the DSCR financing. These loans are specifically designed for investment properties and are not suitable for financing a primary residence.

Why Real Estate Investors Choose DSCR Loans

Both novice and veteran real estate investors opt for DSCR loans due to their distinct advantages. One of the significant draws of DSCR loans is that they provide funding based on the actual cash flow of the investment property, not on the borrower’s income. The application process is streamlined since DSCR loans do not require personal income verification.

Real estate investors often find the qualification process for DSCR loans easier, as there is no need for standard W-2 proof of income.

The Importance of DSCR in Loan Approval

The Debt Service Coverage Ratio (DSCR) is a key metric used by lenders to determine a borrower’s ability to repay the loan; it is essential for loan eligibility and can also influence the structure of loan terms. Lenders often set a minimum DSCR threshold, frequently around 1.2 to 1.25, below which they may not approve a loan due to the higher risk of insufficient cash flow for debt service.

A DSCR of at least 2 is considered very strong and may result in more favorable loan terms, while a higher DSCR overall can denote more comfort in covering debt payments. When the DSCR is less than 1, indicating negative cash flow, it signals a potential inability to cover debt obligations without resorting to external financing, leading to either stricter loan terms or loan denial.

Top Banks Offering DSCR Loans

Photo of a bank building

While there are various financial products available in the market, including bank statement loans, DSCR loans are offered by several well-known banking institutions, such as:

  • Bank of America

  • Wells Fargo

  • Chase

  • Citibank

  • PNC Bank

These banks specialize in these financial products and provide a range of options for real estate investors.

1. Bank of America

Bank of America offers DSCR loans with competitive rates and flexible terms for a wide range of property types. Their comprehensive services make them a go-to for many investors looking for tailored financial solutions and unmatched customer service.

2. Wells Fargo

Wells Fargo provides DSCR loans primarily focused on commercial real estate investments, offering various loan products designed to meet the diverse needs of investors. With solutions tailored to different types of commercial properties, they provide accessibility to a wide range of borrowers thanks to their flexible qualification criteria.

This, coupled with competitive loan-to-value ratios in their DSCR loan offerings, enhances the purchasing power and investment potential of real estate investors.

3. Chase

Although Chase is known for its broad range of financial services, including various loan products, they do not explicitly advertise DSCR loan programs for real estate investors on their official website. The lack of advertised DSCR loans suggests Chase may offer them through alternative channels or by request rather than as a standardized product.

It’s important for real estate investors to directly contact Chase to inquire about tailored DSCR loan options or explore other lenders that openly offer these products.

4. Citibank

Citibank does not publicly list details or availability of DSCR mortgage loans for real estate investors on their official website. Investors interested in DSCR loans with Citibank should reach out directly to the bank for further information.

5. PNC Bank

PNC Bank offers a range of commercial real estate solutions such as acquisition, construction, and permanent financing, which are suitable for real estate investors interested in DSCR loans. With established expertise in the affordable housing sector and targeted agency financing, PNC Bank is an attractive option for real estate investors exploring DSCR loans.

Alternative DSCR Loan Providers

Illustration of private lending concept

In addition to traditional banking institutions, there are alternative DSCR loan providers that offer flexible financing solutions. These include private lending entities and online platforms that cater to a diverse range of investors.

Private Lenders

Private lenders offer flexible financing solutions for DSCR loans, including hard money loans. Some features of private lenders include:

  • No personal income or asset verification required

  • Properties evaluated based on cash flow

  • No employment history checks

  • Minimum debt service coverage ratio of .75%

  • Availability of interest-only payments

Entities like Truss Financial Group, Kiavi, and Griffin Funding are examples of private lenders that offer DSCR loans with these features, tailoring financing to investor needs.

Private lenders offering high loan-to-value and loan-to-purchase ratios, up to 80%, enable investors to leverage their capital for real estate purchases. However, origination fees from private lenders are a percentage of the loan amount and can vary, affecting the overall cost of DSCR loans to the borrower.

Online Platforms

Online platforms offer a range of DSCR loan features such as interest-only options, flexible loan terms, and the ability to purchase properties as an LLC. Companies like New Silver, Kiavi, Griffin Funding, and Truss Financial Group cater to real estate investors with a range of DSCR loan products.

Certain online DSCR lenders offer:

  • Flexible qualification criteria, such as no minimum DSCR requirements or the absence of traditional income verification, making it easier for a diverse range of investors to secure financing

  • More lenient underwriting standards

  • A quicker approval process than traditional lenders.

Key Factors to Consider When Choosing a DSCR Lender

Photo of interest rate chart

When choosing a DSCR lender, you need to consider several key factors, including interest rates, loan terms, and the level of customer service. These elements directly impact your borrowing experience and the overall cost of the loan.

Interest Rates

Interest rates for DSCR loans differ across lenders and are influenced by factors such as credit score, loan-to-value ratios, and property type. As of February 2024, the current DSCR loan interest rate index is at 7.727%, with rates anticipated to stay within the range of 7.25% to 8.25% until the end of 2024.

There is variation in interest rates across different lending platforms, with the lowest rate lock on OfferMarket at 7.625%, higher potential rates and fees for online platforms, and Kiavi offering rates starting at 7.250%. The complexity and sensitivity of interest rates to various factors highlight the importance of lenders providing clear and comprehensive customer service.

Loan Terms

DSCR loans are offered with a wide range of terms, from short-term 5-year loans to longer commitments of up to 40 years, with the most common terms being 30 or 15 years. To qualify for a DSCR loan, borrowers must meet minimum DSCR requirements set by lenders, typically ranging from 1.2 to 1.25. The dscr loan program is designed to accommodate various financial needs and situations, including most dscr loans.

New investors may encounter different loan terms compared to experienced borrowers, possibly facing higher interest rates and stricter maximum loan-to-value (LTV) ratios. Loan agreements for DSCR loans may also include covenants that mandate the borrower to keep a minimum DSCR for the life of the loan, which influences both the terms of the loan and the borrower’s financial strategies.

Customer Service

Personalized customer service is crucial for borrowers navigating the complexities of DSCR loans. Lenders should provide multiple customer support channels, including phone, email, and in-person consultations, to assist borrowers effectively. Real-time assistance from the lender can greatly enhance the borrower’s understanding and management of their DSCR loan.

Guidance from the lender throughout the mortgage loan application and funding process helps ensure a smooth transaction for the client. Positive customer service experiences are associated with higher rates of customer satisfaction and can lead to repeat business for the lender.

Tips for Maximizing Your DSCR Loan Approval Chances

Illustration of credit score improvement

To maximize your chances of securing a DSCR loan, you need a sound strategy. This includes maintaining a healthy credit score, demonstrating strong property cash flow, and preparing the necessary documentation.

This approach not only enhances your chances of approval but also improves your overall financial health by managing monthly payments effectively.

Maintain a Healthy Credit Score

A credit score of 640 or higher is typically required for DSCR loans from private lenders, directly impacting the interest rate, loan amount, and down payment required. Consistently making timely bill payments is crucial for a healthy credit score since payment history constitutes approximately 35% of the FICO score.

Maintaining low credit card balances and well-managed credit utilization demonstrate responsible credit management, enhancing credit scores necessary for DSCR loan approval. Consistent monitoring and correcting of credit report inaccuracies, as well as strategic management of debt and credit history, can result in improved credit scores, thereby influencing DSCR loan opportunities.

Demonstrate Strong Property Cash Flow

A property’s cash flow is a critical factor in securing a DSCR loan. Investors can showcase strong property cash flow by:

  • Raising rent to match market value

  • Introducing income-generating amenities

  • Filling vacant spaces to maximize rental income

  • Implementing cost-effective property management practices that reduce operating expenses

  • Improving tenant retention and marketing strategies to reduce property vacancies

Enhancing a property’s net cash flow can further solidify its standing for DSCR loan approval. It is also important to understand how loan amounts and interest rates affect cash flow, as smaller loans often have higher rates, and borrower experience can influence both rates and the loan-to-value ratio.

Prepare Necessary Documentation

Investors should maintain thorough records of property income and expenses as they are critical for assessing cash flow stability during the loan approval process. Properties that have undergone significant renovations require documentation, such as receipts, invoices, and work orders, to be submitted along with the loan application.

A credit authorization document is essential as it permits lenders to obtain a credit report for the loan’s guarantors. Compiling an organized, comprehensive package of all required documentation can expedite the loan application process and mitigate the risk of delays.


In this deep dive into the world of DSCR loans, we’ve explored various aspects of this unique financing option. We’ve looked at what DSCR loans are, why they are a preferred choice for real estate investors, the top banks and alternative providers that offer them, and key factors to consider when choosing a DSCR lender. We’ve also provided tips to maximize your chances of securing a DSCR loan.

The world of real estate financing may seem complex, but armed with the right knowledge, you can navigate it with confidence. Remember that maintaining a healthy credit score, demonstrating strong property cash flow, and preparing the necessary documentation are crucial steps towards securing a DSCR loan. Here’s to your success in real estate investing!

Frequently Asked Questions

How do I get started with a DSCR loan program?

To get started with a DSCR loan program, you’ll generally need a down payment of at least 20%, a strong DSCR between 1 and 1.5, and a minimum credit score requirement, typically ranging from 620 to 700. Additionally, detailed financials reflecting the property’s income and expenses will be required for the loan application.

What credit score do you need for a DSCR?

For a DSCR loan, you generally need a credit score of 680, though some lenders may accept a minimum score of 640. The higher your credit score, the better your loan terms will likely be.

What is a DSCR loan?

A DSCR loan is an investment property loan that evaluates the property’s cash flow rather than the borrower’s personal financial details. It is used to assess the property’s ability to cover its debt obligations.

Why do real estate investors prefer DSCR loans?

Real estate investors prefer DSCR loans because they do not require personal income verification and the funding is based on the property’s cash flow, making it easier to secure financing for investment properties.

Which top banks offer DSCR loans?

You can find DSCR loans at top banks such as Bank of America, Wells Fargo, Chase, Citibank, and PNC Bank. These banks offer DSCR loans to qualified applicants.