What is a DSCR Refinance Loan?
A Debt Service Coverage Ratio (DSCR) Refinance Loan is designed for real estate investors who want to refinance their rental properties without verifying personal income. Instead of using tax returns, W-2s, or pay stubs, DSCR loans qualify borrowers based on the rental income the property generates.
A DSCR Refinance Loan allows rental property owners to refinance their mortgage using the income from their investment properties, rather than personal income. Lenders calculate eligibility based on the Debt Service Coverage Ratio (DSCR), which compares rental income to the property's mortgage payment.
✔ If the rental income covers or exceeds the mortgage payment, the borrower qualifies for refinancing.
✔ DSCR loans are ideal for investors with multiple properties, self-employed individuals, and those looking to scale their rental portfolio.
If you’re an investor looking to lower your interest rate, improve cash flow, or access home equity, a DSCR refinance could be the perfect solution.
How Does a DSCR Refinance Loan Work?
Instead of reviewing personal financial documents, lenders evaluate:
✔ The rental income generated by the property.
✔ The DSCR ratio, which is calculated as:
DSCR= Rental Income divided by Mortgage Payment (PITI)
✔ If the DSCR is 1.0 or higher, meaning rental income covers the mortgage, lenders typically approve the loan.
✔For lower DSCR ratios (below 1.0), lenders may still approve the loan with a larger down payment or reserves.
Qualifications for a DSCR Refinance Loan
✅Credit Score:
620+ for most lenders. 680+ preferred for the best interest rates.
✅Debt Service Coverage Ratio (DSCR):
1.0+ DSCR is ideal, meaning rental income covers mortgage costs. Some lenders allow 0.75-0.99 DSCR with a larger down payment or reserves.
✅Loan-to-Value (LTV) Ratio:
Up to 75% for cash-out refinances. Up to 80% for rate-and-term refinances.
✅Reserves Requirement:
3-12 months of mortgage payments in reserves may be required.
✅Property Type Eligibility:
Available for single-family rentals, multifamily properties, condos, and short-term rentals (Airbnb/VRBO).
Is a DSCR Refinance Loan Right for You?
At Acre Lending Team, we specialize in helping real estate investors refinance rental properties with DSCR loans. Whether you're looking to lower your rate, reduce payments, or take cash out for new investments, we’re here to help.
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