As a real estate investor, having access to funds is key for expanding your portfolio. Texas DSCR loans are designed to help you achieve this by enabling you to purchase your first investment property or continue to grow your real estate portfolio without worrying about your finances.
What is a Texas DSCR Loan?
A DSCR loan, also called a Debt Service Coverage Ratio loan, is designed to help real estate investors grow their portfolios or get started in real estate investing. These loans focus on the DSCR, which helps show whether the property in question can make enough money to cover its debt obligations, making it a wise investment.
DSCR loans Texas are ideal for income-generating properties like apartments, multi-family units, and commercial spaces. They’re a great choice for those who might not qualify for traditional financing, as these loans don’t consider personal finances but how much money the property can generate.
How do DSCR Loans in Texas Work?
Debt Service Coverage Ratio loans work by focusing on the property’s income-generating potential rather than the borrower’s finances. Lenders use the DSCR to determine whether it’s worth providing the financing.
For the DSCR calculation, lenders divide the property’s net operating income (NOI) by the total debt service. This ratio gives them a better idea of whether the property can generate enough revenue to cover the monthly loan payments and operating expenses. A higher DSCR indicates a more reliable investment, showing the property generates sufficient income to meet its debt obligations.
For example, a DSCR of 1.25 means the property generates 25% more income than the amount needed to cover its debt service, making it a safer investment for lenders.
Texas DSCR Loan Benefits
As an investor, you have several loan options when purchasing commercial real estate. DSCR loans are one of the most sought-after commercial loans for several reasons:
High Loan Limits
DSCR loans allow you to obtain higher loan amounts and purchase higher-value and lucrative properties for your rental portfolio.
Flexible Loan Terms
Lenders offer more flexibility in their loan terms, allowing you to get a personalized solution that helps you maximize cash flow.
Income-Based
These loans focus on the property’s income rather than yours, making them more accessible to investors who might not qualify for other loans.
No Income Verification
You don’t have to provide traditional income verification, making it easier to qualify if you’re an investor or have non-traditional income streams.
Rental Portfolio Growth
By focusing on a property’s positive cash flow, DSCR loans enable you to expand your portfolio by leveraging the equity in your existing properties.
Why Choose F5 Mortgage for a Texas DSCR Loan?
When buying investment properties and securing a DSCR loan, you’ll want to work with a mortgage lender who understands the complexities of the loan. F5 Mortgage can help real estate investors build their portfolios and get new investors started.
When you work with our DSCR lenders, you’ll benefit from:
- DSCR Loan Expertise: Our lenders have extensive experience with DSCR loans in Texas and will work with you to help you qualify and secure the investment property you want.
- Market Expertise: We’re very familiar with the real estate market throughout Texas and can provide guidance on rental properties, property taxes, and much more.
- Personalized Mortgage Solutions: No two borrowers are the same, so we personalize all our mortgage solutions to meet each borrower’s needs and goals.
- Competitive Rates: We offer favorable loan terms and interest rates, including interest-only options and unique repayment schedules.
- Streamlined Process: We strive to make the DSCR loan application process as smooth as possible so you can secure your investment properties quickly.
- Customer Support: Our DSCR lenders are there to assist you throughout the mortgage process and answer your questions and concerns.

DSCR Loan Property Types in Texas
Like other home and rental loans, DSCR loans have property types for which you’re allowed to use the financing and some that you can’t. A DSCR loan program will allow you to purchase:
- Commercial properties
- Multi-family properties
- Single-family residential properties like townhomes and condos
- Short-term rentals
Even if the following property types can generate rental income, you still can’t use DSCR loans to purchase these:
- Log cabins
- Rural properties
- Condotels
- Dome homes
- Manufactured Housing
- Multiple properties with 750 square feet or less

How Do I Qualify for a DSCR Loan in Texas?
Despite not requiring proof of income, DSCR loans still have specific eligibility requirements that need to be met. To qualify for a DSCR loan program, you’ll need to:
Evaluate Property Income
Review current leases, market rental rates, and occupancy levels to determine the property’s profitability.
Calculate DSCR
Divide the net operating income (NOI) by the total debt service to make sure you meet the lender’s requirements.
Collect Documentation
Gather all the documentation the lender will need to determine whether to approve your DSCR loan application.
Credit Score
Although your credit score isn’t the most important factor in the loan approval process, keeping it above 620 will help show lenders that you’re more likely to make your monthly mortgage payments on time.
Having a solid DSCR proves that the property’s cash flow will exceed what you’ll need for loan repayment.
Qualifying for a Texas DSCR loan is fairly standard, but it’s important to check with the lender you want to work with if they have any additional requirements to increase your chances of being approved.
How to Apply for a DSCR Loan in Texas?
Similar to any other home loan, there’s a specific process that you’ll need to follow to secure a DSCR loan. The process looks like this:
Contact Your Chosen Lender
Get in touch with a trusted and experienced lender, like F5 Mortgage, to discuss your options and explore your financing needs.
Property Analysis
Work with the lenders to analyze the property type you want to buy. This includes looking at the potential rental income or purchase price, which will help with DSCR loan eligibility.
Prepare Your Documents
Gather all the documents you’ll need to provide the lender for your application, such as the property analysis, lease agreements, and the property’s financial statements.
Submit the Application
You’ll officially submit the DSCR loan application with the private lender. This includes all the documentation you gathered and any other information the lender requires.
Underwriting
The lenders will review your application, assess the property’s financial situation, and verify any qualifications.
Approval
If all goes well, you’ll be approved for your DSCR loan. You’ll receive the loan contract with the loan term, interest rates, repayment schedule, and 60 any other vital information.
Texas DSCR Loan Requirements
To qualify for Texas DSCR loans, you need to meet specific requirements. Knowing these requirements can help you determine your eligibility before applying or make necessary adjustments to improve your chances. Here are the requirements for DSCR loans:
- Minimum DSCR: Most DSCR lenders want a minimum DSCR of 1.2 to 1.5. This shows that the property you’ve chosen can adequately cover its debts with its income.
- Borrower’s Credit Score: This isn’t as important as the other requirements, but most private lenders require real estate investors to have a minimum credit score of 620.
- Property Appraisal: Texas DSCR loans require a professional appraisal to evaluate the property’s market value and income potential.
- Loan-To-Value Ratio (LTV): Most lenders allow an LVT of up to 80%. This means that you can borrow up to 80% of the property’s market value.
- Property Earning Potential: Bank statements prove how much the property is making or its earning potential.
- Down Payment: You’ll have to put down at least 20% of the property’s current market value. The minimum down payment can vary depending on the lender and your loan conditions.
- Experience: Some lenders might require the borrower to have experience with property management or ownership, especially for larger properties. It’s best to check with your lender if this is a requirement they have.
Some lenders might request pay stubs and bank statements to assess your financial health further.
While DSCR loans primarily focus on the market rent, these additional documents help provide a comprehensive view of your ability to manage mortgage payments and maintain a healthy debt-to-income ratio. For those with non-traditional income sources, bank statement loans can be a viable alternative.
Texas DSCR Loan FAQs
How do Lenders Assess DSCR for a rental property in Texas?
You or the lender can calculate the DSCR for the subject property by dividing its net operating income (NOI) by its total debt service.
What is a good DSCR ratio for securing a loan in Texas?
Ideally, you’ll want a DSCR ratio of 1.2 to 1.5 to secure the DSCR loan amount.
Can you get a DSCR loan without income verification in Texas?
Yes, you can. Asset-based loans don’t require traditional income verification like conventional home loans. You will have to provide your credit report, but the lender won’t do a deep dive into your finances.
What types of properties are eligible for DSCR loans in Texas?
With a Texas DSCR loan, you can purchase multi-family residences, commercial properties, rental homes, mixed-use buildings, and short-term rental properties.
What is the minimum DSCR needed for a loan in Texas?
Most lenders in Texas City require real estate investors to have a DSCR between 1.2 and 1.5 for the property they’re trying to buy with the loan.
Are interest-only DSCR loans available in Texas?
Yes. You can secure interest-only DSCR loans in Texas. During the interest-only period, you’ll have lower monthly payments, increasing your cash flow.
How does a DSCR loan differ from traditional loans in Texas?
DSCR loans differ from traditional loans in many ways. The main difference is that traditional loans focus on the borrower’s creditworthiness. In contrast, DSCR loans look at a property’s income potential, making them an excellent option for real estate investors in Texas.
What is the typical interest rate for DSCR loans in Texas?
Interest rates for DSCR loans tend to be higher than those for conventional loans, so the typical rate is between 5% and 7%.
How long does it take to close a DSCR loan in Texas?
How long it’ll take you to close a DSCR loan will vary. In general, you can expect to close on this property loan within 30 to 45 days.
Can foreign nationals qualify for DSCR loans in Texas?
Many lenders offer DSCR loans for foreign nationals in Texas. If they do so, they might have different eligibility requirements or additional documentation that the borrower must provide.
Are DSCR loans suitable for short-term rental properties in Texas?
Yes, you can use DSCR loans for short-term rental properties in Texas. Since DSCR loans focus on the property’s potential, short-term vacation rentals offer great investment opportunities.
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