Investing
DSCR Loans: Navigating the Do’s and Don’ts for Real Estate Investors
Published by Jessica Weisman-Pitts
Posted on December 15, 2023
4 min readLast updated: January 31, 2026
Global Banking & Finance Review®
Company
Published by Jessica Weisman-Pitts
Posted on December 15, 2023
4 min readLast updated: January 31, 2026
Real estate investment offers a world of opportunities, and understanding how to finance these ventures is key. One option, DSCR (Debt Service Coverage Ratio) loans, serves as a valuable resource for building a property portfolio. However, they’re not a one-size-fits-all solution. This article explores the appropriate use of DSCR loans and highlights scenarios where alternative options might be better. We’ll draw on the expertise of Visio Lending, a national leader in DSCR Loans, to guide you through your real estate financing journey.
Buying Your Own Home: DSCR loans are designed for investment properties, not for purchasing your primary residence. Traditional mortgages are more suitable here.
First-Time Investors: If you’re stepping into your first investment property, conventional mortgages often offer lower interest rates and fit within the usual income and documentation requirements. But, for those wanting to separate their personal and investment finances, a DSCR loan could be used for financing through an LLC.
Renovating Properties: DSCR loans typically support rent-ready properties. For extensive renovations or flips, other financing like hard money loans are more appropriate, followed by a DSCR loan for long-term financing.
Properties with Lower Rental Income: In markets where rent prices haven’t caught up with property values, covering monthly debts with rental income can be challenging. Lenders generally expect a minimum 1.2 DSCR ratio. However, lenders like Visio provide alternative programs for these scenarios, especially for applicants with strong credit.
Investing in Lower-Value Properties: With most lenders setting minimums for loan amounts and property values, smaller investments might not qualify for a DSCR loan. An alternative strategy could be to use equity from another property to fund these investments.
Visio Lending, with its wealth of experience since 2012, outlines the core requirements for securing a DSCR mortgage:
Credit Score: A minimum of 680, with better rates for higher scores.
Down Payment: Typically, 70%-80% loan-to-value for purchases and 65%-75% for refinances.
Property Value and Loan Amount: A minimum property value of $150k and a standard loan amount of $75k.
Rates and Fees: Be clear on all costs, including fees for origination, underwriting, and potential prepayment penalties.
Eligible Property Types: Confirm which types of properties the lender will finance, as this varies.
Focus on Real Estate Investors: Opt for lenders who understand the needs of investors, with specialized teams and programs.
Insurance and Financing Structures: Check their requirements for property insurance and the flexibility to finance through different legal entities.
While DSCR loans offer significant advantages for experienced real estate investors, they aren’t always the right choice for every situation. By understanding when to use them and when to consider other options, investors can make smart, informed decisions. Visio Lending, with its deep understanding of DSCR loans, provides a valuable resource for those navigating these financial decisions.
Established in 2012, Visio Lending has grown into a key player in the DSCR loan market. Over the years, Visio Lending has honed its expertise in this specialized field, originating more than $2.5 billion in DSCR loans. This impressive sum includes over $750 million dedicated to vacation rental financing. Visio Lending also promotes investing in Virginia through a DSCR loan. The Virginia market has a diverse real estate landscape, strong market trends, landlord-friendly regulations, and tax benefits, all of which make Virginia the best place to build a firm real estate portfolio.
Connect with Visio Lending on their social media channels to stay informed on the latest in real estate investment and DSCR loans. Follow them on Facebook, LinkedIn, Instagram, and Twitter for updates, insights, and community engagement.
A Debt Service Coverage Ratio (DSCR) loan is a type of financing used primarily for investment properties, where the loan amount is determined based on the income generated by the property.
A credit score is a numerical representation of a person's creditworthiness, based on their credit history. It helps lenders assess the risk of lending money to an individual.
A mortgage is a loan specifically used to purchase real estate, where the property itself serves as collateral for the loan.
A down payment is an upfront payment made when purchasing a property, typically expressed as a percentage of the total purchase price.
Investment properties are real estate assets purchased with the intention of generating income, either through rental income or capital appreciation.
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