Investor Financing
DSCR Loans — Debt Service Coverage Ratio Financing for Real Estate Investors
Coastal Funding Corporation is a DSCR loan specialist. We help real estate investors qualify for investment property financing based entirely on the property's rental income — not personal income, W-2s, or tax returns.
Program Highlights
Coastal Funding DSCR Loan Program at a Glance
In Depth
Everything You Need to Know About DSCR Loans
What Does DSCR Stand For?
DSCR stands for Debt Service Coverage Ratio. It is a financial metric used by lenders to evaluate whether a property's rental income is sufficient to cover its debt obligations. The formula is simple: divide the gross monthly rent by the monthly PITIA (Principal, Interest, Taxes, Insurance, and Association dues). A ratio of 1.0 means the property exactly covers its debt. A ratio above 1.0 means positive cash flow; below 1.0 means the rent doesn't fully cover the payment.
Why DSCR Loans Are the Preferred Choice for Investors
Real estate investors face a unique challenge with traditional mortgage financing: their tax returns often show little to no taxable income due to depreciation, write-offs, and business deductions. This makes it difficult — or impossible — to qualify for conventional loans even when they have strong cash flow and substantial assets.
DSCR loans solve this problem entirely. Because qualification is based on the property's income rather than the borrower's personal income, investors can continue growing their portfolios without being penalized for smart tax planning. Coastal Funding Corporation has been helping investors navigate this exact challenge since 2004.
Who Is a DSCR Loan Right For?
- Real estate investors purchasing single-family or multi-family rental properties
- Self-employed borrowers whose tax returns understate their income
- Investors who own multiple properties and have hit conventional loan limits
- Foreign nationals investing in U.S. real estate
- Investors using LLCs, partnerships, or trusts to hold properties
- Short-term rental (Airbnb/VRBO) operators seeking investment financing
- Borrowers seeking cash-out refinances on existing investment properties
How Coastal Funding Calculates Your DSCR
For a purchase, we use the appraiser's market rent estimate (Form 1007 for single-family or Form 1025 for 2–4 units). For a refinance of an existing rental, we use the current lease agreement. For short-term rentals, we use 12 months of platform income statements or a market STR analysis from a qualified appraiser.
The resulting DSCR ratio determines your rate tier. Ratios of 1.25 and above receive the most competitive pricing. Ratios between 1.0 and 1.24 qualify at standard rates. Ratios between 0.75 and 0.99 are still eligible but may carry a slightly higher rate to reflect the additional risk.
DSCR Loan Terms Available Through Coastal Funding
Coastal Funding works with a broad network of DSCR lenders to offer flexible loan structures including 30-year fixed-rate mortgages, 5/1 and 7/1 ARMs, and interest-only options. Interest-only loans can significantly improve cash flow in the early years of ownership, making them popular with investors who plan to refinance or sell within 5–10 years.
Common Questions
DSCR Loan FAQ
What is the minimum DSCR to qualify?
Coastal Funding can approve DSCR loans with a ratio as low as 0.75. A DSCR of 1.0 means the property fully covers its debt service. Ratios above 1.25 typically receive the most favorable pricing.
Do I need to show personal income or tax returns?
No. DSCR loans are underwritten on the property's rental income, not your personal income. W-2s, tax returns, and employment verification are not required.
Can I use an LLC or entity to take title?
Yes. Coastal Funding accepts LLC, LP, corporation, and trust vesting — making DSCR loans ideal for investors who hold properties in business entities.
What property types are eligible?
Single-family residences (1–4 units), condos, townhomes, multi-family (5–8 units), and short-term rentals (Airbnb/VRBO) are all eligible. Condotels and some rural properties may have additional requirements.
What is the maximum loan amount?
Coastal Funding offers DSCR loans from $100,000 up to $3 million and above for qualified investors. Jumbo DSCR options are available for high-value investment properties.
Can I do a cash-out refinance with a DSCR loan?
Yes. Cash-out refinances are available up to 75% LTV on most investment properties. Funds can be used for additional acquisitions, renovations, or any investment purpose.
How is rental income determined for a DSCR loan?
For existing rentals, the current lease agreement is used. For vacant properties or new acquisitions, a market rent appraisal (Form 1007 or 1025) from a licensed appraiser establishes the qualifying rent.
What credit score is required?
Most DSCR loan programs require a minimum credit score of 620–640. Higher scores (700+) unlock better rates and higher LTV options.
Are short-term rental (STR) properties eligible?
Yes. Coastal Funding works with lenders that accept short-term rental income from platforms like Airbnb and VRBO. STR income is typically documented using 12 months of platform statements or a market STR analysis.
How quickly can a DSCR loan close?
With complete documentation, DSCR loans can close in as few as 21 days. The streamlined underwriting process — focused on the property rather than personal financials — speeds up approval significantly.
Ready to Apply for a DSCR Loan?
Coastal Funding Corporation's DSCR specialists are standing by. Apply online in minutes or call us to speak with an investor lending expert today.