Home / Loan programs / DSCR rental loans
DSCR loans for DC-area rental property
Long-term financing approved on what the property earns. Rowhouses, condos, small multifamily and group-house rentals, with no tax returns or employment check.
DSCR loan terms
| To buy | up to 85% LTV |
| Cash-out refinance | up to 80% LTV |
| Credit scores from | 600 |
| Fixed terms | 5 to 30 years |
| Prepayment choices | 3-year, 5-year or none |
| Typical closing | about 30 days |
At a 600 score the limit is 70% loan-to-value. Stronger credit qualifies for up to 85% on a purchase.
DSCR in plain terms
DSCR is short for debt service coverage ratio. It answers one question: does the rent pay the mortgage? If it does, the loan can be approved without looking at your personal income.
DSCR = monthly rent ÷ monthly payment. The payment counts principal, interest, property taxes, insurance and any condo or homeowners association fee.
| Rent | Payment | DSCR | Reading |
|---|---|---|---|
| $4,550 | $3,500 | 1.30 | Income is 30% above the payment |
| $3,500 | $3,500 | 1.00 | Income equals the payment |
| $3,150 | $3,500 | 0.90 | Income is short; expect less leverage or a higher rate |
We prefer a ratio of 1.0 or higher. A strong borrower can qualify under 1.0 with lower leverage, and there is a no-DSCR option up to 75% loan-to-value at a higher rate.
Which rent counts in the DC area
- Long-term rentals. Year-long leases are the core of the market, with steady demand from federal workers, contractors, students and military households. We use the lease or market rent from the appraisal.
- Group houses and by-the-room rentals. Larger rowhouses near universities and Metro stations often rent by the room. The appraisal’s market rent sets the income we use.
- Two-unit rowhouses. A basement apartment or a two-unit conversion counts both rents, provided the unit is legal and has the right certificate of occupancy.
- Short-term rentals. In the District, a short-term rental license is available only to a person renting out their own primary residence, and a host-absent vacation rental is capped at 90 nights a year. Investment properties and second homes cannot be licensed, so most investor-owned homes in DC are underwritten on long-term rent. Maryland and Virginia counties set their own rules, and several also limit short-term rentals to a host’s primary residence.
Rental rules that affect a DC loan
- Licensing. Renting a home in DC requires a Basic Business License with a rental housing endorsement, a pre-license housing inspection for one- and two-family rentals, registration with the Rental Accommodations Division, and a certificate of occupancy for buildings of two units or more.
- Rent stabilization. DC rent control applies to buildings of five or more units built before 1976, unless an exemption applies, such as a natural person owning four or fewer rental units in the District. Every unit must be registered as controlled or exempt.
- Property tax. DC taxes most homes, rented or owner-occupied, at $0.85 per $100 of assessed value. The risk for investors is the vacant and blighted classes: a property left unoccupied for 90 days or more must be registered, and is taxed at $5.00 per $100 if vacant or $10.00 if blighted. A property under construction with permits from the last 12 months, or actively listed for sale or rent, can qualify for an exemption, but you have to apply for it.
- Selling later. Most single-family homes, including a home with one accessory unit, have been exempt from DC’s Tenant Opportunity to Purchase Act since 2018, though elderly and disabled tenants under older leases keep their rights. Buildings with two or more rental units can carry TOPA rights that add notice periods before a sale can close.
Get real figures for tax, insurance and association fees before you make an offer. They decide whether a deal clears 1.0.
Loan options
- Fixed terms from 5 to 30 years. The 10/1 interest-only and the 30-year fully amortized loan are chosen most often.
- Qualifying on the interest-only payment is available.
- A 3-year or 5-year prepayment penalty. The 5-year option usually prices about 0.25 to 0.5% lower. No penalty is available at a higher rate.
- One property or a whole portfolio.
Refinancing after a renovation or a build
If you renovate or build a property and decide to keep it, a DSCR loan replaces the short-term fix and flip or construction loan with long-term debt. A cash-out refinance at up to 80% loan-to-value can hand back much of the cash you put in.
Documents we ask for
- Loan application
- Signed purchase contract, or your original settlement statement for a refinance
- The lease, or market rent from the appraisal
- Two months of bank statements
- Insurance and title contacts, and someone to let the appraiser in
- For a condo: the association budget and any special assessment notices
- For an LLC: articles of organization, EIN letter and operating agreement
The full list is in our hard money loan document checklist.
DSCR loans: common questions
We prefer 1.0 or higher, which means the rent covers the full payment. Strong borrowers can qualify below 1.0 with lower leverage, and a no-DSCR program is available up to 75% loan-to-value at a higher rate.
Generally not on an investment property, because DC only licenses short-term rentals in the host’s own primary residence. We underwrite DC rentals on long-term rent.
Yes, when the second unit is legal and has the certificate of occupancy it needs. Both rents go into the DSCR.
It can affect the rent you can charge in a controlled building. Most single-family homes and small buildings owned by individuals are exempt, but every unit must be registered with the Rental Accommodations Division.
The minimum is 600, at up to 70% loan-to-value. Higher scores qualify for up to 85% of the purchase price.
No. A DSCR loan is approved on the property’s rental income. There is no employment, tax return or debt-to-income review.
No. These are business-purpose loans and are not reported on your personal credit like a conventional mortgage. There is no cap on how many properties we will finance for you.
Buying or refinancing a DC-area rental?
Send the address, the price and what you plan to do with the property. We will reply with the leverage and pricing that fit your deal.