In today’s real estate market, smart investors are turning to DSCR loans to grow rental portfolios without the hurdles of traditional financing. These loans rely on property income, not personal earnings, which makes them faster, more flexible, and better suited for long-term strategy.
At Groundfloor Lending, we help real estate investors unlock funding based on cash flow potential. Whether you’re building a single-unit rental or managing a multi-property portfolio, understanding DSCR loan requirements is key to faster closings and better terms.
This guide outlines the 10 most important factors lenders consider when reviewing DSCR loan applications and offers insight into what sets Groundfloor apart.
DSCR loans are underwritten based on a property's income generation, not the borrower's personal income. Rather than analyzing W-2s or debt-to-income ratios, lenders focus on the property's rental performance. This structure benefits investors seeking financing based on investment returns.
Here’s how DSCR loans differ from traditional mortgages:
The debt service coverage ratio (DSCR) is the cornerstone of these loans. Lenders want to ensure your property's income is sufficient to cover the loan payments. While the minimum ratio often ranges from 1.1 to 1.3, Groundfloor Lending considers strong applications starting at 1.1 when other factors, like reserves and credit, are solid.
Though DSCR loans are less credit-heavy than conventional loans, your score still plays a role. Groundfloor accepts borrowers with scores as low as 640, and those with 700 or above often qualify for better rates and higher leverage.
Most lenders focus on residential properties. Groundfloor finances:
Expect to contribute 20% to 25% of the purchase price. Higher-risk properties or first-time investors may need a greater equity contribution.
The physical condition of the property directly affects loan eligibility. Groundfloor requires standard inspections and may request additional evaluations for roof, foundation, or HVAC systems. Learn more about evaluating property condition.
Lenders assess how realistic your rent projections are. This means demonstrating:
Don’t overestimate income. If your numbers are too optimistic, your application may lose credibility. Use local comps and historical data to build your case.
Lenders want reassurance that you can weather vacancies or unexpected repairs. Groundfloor typically requires 3 to 6 months of PITIA (principal, interest, taxes, and insurance) remaining post-closing.
Comprehensive insurance is required, and special property risks, like flood zones or hurricane exposure, may demand supplemental policies. Consider working with a broker who specializes in investment property coverage for tailored options.
If you're purchasing through an LLC or trust, lenders will review your entity documentation. Groundfloor supports entity-based borrowing and provides guidance for investors looking to set up a compliant structure.
Geography affects both rental income and risk. Properties in high-demand markets with strong rental history are generally more favorable to underwrite. Groundfloor evaluates market strength, local ordinances, and future development trends when assessing location.
Thorough documentation increases your approval odds. Have the following ready:
Documentation serves as the foundation of your loan application. Organized, transparent files reflect borrower readiness and reduce delays.
Lenders want to know how you’ll manage your investment. Whether you self-manage or hire professionals, document your experience or third-party agreements. Lenders appreciate a clear plan.
Lenders are increasingly interested in operations. Clear management plans give them confidence that your investment will remain stable and well-maintained.
A strong exit strategy helps demonstrate financial preparedness. Options include:
Your exit plan provides insight into your long-term goals and ability to repay. It's one more way to build trust with your lender.
To make your DSCR loan process smoother:
Prequalification helps frame expectations and gives you a clearer path forward, especially in fast-moving markets.
DSCR loans are especially useful for those managing multiple properties. Because they focus on property performance instead of personal income, you can:
These benefits make DSCR loans a strong long-term financing strategy.
Misjudging income or overlooking expenses leads to inaccurate ratios. Use tools or lender-provided calculators to double-check your numbers.
Missing documents delay closings and lower lender confidence. Stay organized and submit a complete file.
Avoid speculative deals or properties with high rehab risk. Lenders prefer stable rentals with reliable comps and occupancy trends.
Use conservative projections. Don’t base assumptions on peak rents or full occupancy unless supported by reliable data.
Vet every property thoroughly. Check zoning, local laws, and future infrastructure plans. Rushed purchases often create financing obstacles.
If you’re not experienced in property management, consider professional help. Poor management increases risk and can derail long-term plans.
Many investors forget to include items like:
Accurate budgets create trust and improve loan terms.
Groundfloor can approve FICO scores as low as 640. Borrowers with scores above 700 typically qualify for lower rates and higher leverage.
Most lenders require a DSCR of 1.20 to 1.25. Groundfloor considers ratios down to 1.10 when other strengths are present.
Expect to put down 20 to 25 percent of the purchase price. Higher-risk deals may require more equity.
Lenders might require 3 to 6 months of PITIA available after closing to cover unexpected costs or vacancies.
No. DSCR loans are based on rental income, not personal earnings. W-2s and tax returns are usually not required.
Single-family homes, condos, townhomes, and two- to four-unit rentals are common. Some lenders finance up to eight units if they meet guidelines.
DSCR loans offer a fast and flexible path to building your rental portfolio. At Groundfloor Lending, we’ve helped thousands of real estate investors secure funding with:
Our team understands rental strategy, short-term income cycles, and how to help you meet financing goals. Let’s connect and talk about how a DSCR loan could support your next property investment.