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DSCR rental loans in Washington
Long-term financing for rental property, qualified on the property’s income instead of yours. No tax returns, no employment check, no debt-to-income ratio.
DSCR rental loan terms
| Purchase | up to 85% LTV |
| Cash-out refinance | up to 80% LTV |
| Minimum credit score | 600 |
| Loan terms | 5 to 30 years, fixed |
| Prepayment options | 3-year, 5-year or none |
| Typical time to close | about 30 days |
A 600 credit score qualifies at up to 70% loan-to-value. Higher scores qualify for up to 85% on a purchase.
What a DSCR loan is
DSCR stands for debt service coverage ratio. It measures whether a rental property’s income covers its own mortgage payment. Because the loan is approved on that ratio, your job history and personal income are not part of the decision.
DSCR = monthly rent ÷ monthly payment, where the payment includes principal, interest, property taxes, insurance and any association dues.
| Monthly rent | Monthly payment | DSCR | What it means |
|---|---|---|---|
| $4,000 | $3,000 | 1.33 | Rent covers the payment with 33% to spare |
| $3,000 | $3,000 | 1.00 | The property breaks even |
| $2,700 | $3,000 | 0.90 | Rent falls short, so expect lower leverage or a higher rate |
A DSCR of 1.0 or better is preferred. Strong borrowers can qualify below 1.0 at lower leverage, and a no-DSCR option is available at up to 75% loan-to-value for a higher rate.
How rental income is verified
- Existing rental: the signed lease.
- Purchase: market rent from the appraisal.
- Short-term rental: 12 months of income history, or projected income from AirDNA.
Short-term rental loans
We qualify short-term rentals on projected short-term income instead of long-term market rent, which usually supports a larger loan. Projected Airbnb or AirDNA income is counted at roughly 70 to 80%. The property has to be a permitted short-term rental with no zoning restriction against it.
In Washington those rules are set by each city and county. Seattle requires an operator license and limits each operator to two units. Vacation markets such as Lake Chelan, Leavenworth, the Washington coast and the San Juan Islands have many investor-owned short-term rentals, but several of those counties cap permits or limit them by zone. Check local registration and zoning before you make an offer.
Loan structures
- Fixed terms from 5 years to 30 years. The most popular are the 10/1 interest-only loan and the 30-year fully amortized loan.
- Interest-only payments can be used to qualify.
- Prepayment penalty of 3 or 5 years. Choosing 5 years typically lowers the rate by about 0.25 to 0.5%. A no-penalty option is available at a higher rate.
- One loan for a single property or for many. See portfolio loans.
Properties and borrowers we finance
- Long-term rentals and short-term rentals
- Warrantable and non-warrantable condos
- Condotels
- Foreign national borrowers
- Rental portfolios
Non-warrantable condos and condotels are financed at slightly lower leverage.
Refinancing out of a fix and flip loan
A DSCR loan is the usual exit when you renovate a property and decide to keep it as a rental. Refinancing replaces the short-term bridge loan with long-term debt, lowers the monthly payment, and a cash-out refinance at up to 80% loan-to-value can return much of the capital you put into the project.
What to send us
- A loan application
- The signed purchase contract, or the original settlement statement on a refinance
- The lease for a long-term rental, or an income statement for a short-term rental
- Two months of bank statements
- Your insurance and title contacts, and someone who can give the appraiser access
- If you borrow through an LLC: articles of organization, EIN letter and operating agreement
See the full hard money loan document list.
DSCR loan questions
A DSCR of 1.0 or better is preferred, meaning the rent at least covers the full monthly payment. Strong borrowers can qualify below 1.0 at lower leverage, and a no-DSCR option is available at up to 75% loan-to-value for a higher rate.
DSCR loans start at a 600 credit score at up to 70% loan-to-value. Higher scores qualify for up to 85% of the purchase price.
No. A DSCR loan is underwritten on the property’s rental income, so there is no job history, tax return or debt-to-income review.
Yes. Short-term rentals are qualified on 12 months of income history or on projected income from AirDNA, counted at roughly 70 to 80%. The property must be a permitted short-term rental.
No. These are business-purpose loans and do not report on your personal credit the way a conventional mortgage does. There is also no limit on the number of properties we will finance for you.
About 30 days, including the appraisal.
Buying or refinancing a rental?
Tell us the address, the purchase price and your plan for the property. We will come back with leverage and pricing for your scenario.