DSCR Loans. The Property Qualifies, Not Your W-2.

Yes, we require borrowers to close these commercial loans under a business entity, such as an LLC, S-Corp, or C-Corp. This structure aligns with the business-purpose nature of the transaction and helps protect your personal credit profile. It also ensures the loan remains classified as a commercial transaction rather than a consumer mortgage.

For vacant properties, the qualifying rental income is determined by the appraiser during the valuation process. The appraiser completes Form 1007 (Single-Family Comparable Rent Schedule), which evaluates comparable rental properties in the immediate neighborhood to establish a realistic market rent. We use this appraised market rent to calculate the debt service coverage ratio.

Yes, we fund short-term rentals and vacation properties using DSCR financing. To qualify, we look at the historical rental income of the property or use specialized short-term rental data providers to establish the projected revenue. Borrowers must also ensure the property complies with all local short-term rental licensing requirements and zoning rules.

Prepayment penalties are standard on commercial rental loans. They typically follow a declining structure, such as a 5-4-3-2-1 or 3-2-1 schedule, where the penalty percentage decreases each year. We also offer options to shorten or eliminate the prepayment penalty in exchange for a slightly higher interest rate or upfront points, giving you the flexibility to adapt to changing market rates.

No, commercial DSCR loans typically require a minimum down payment of twenty percent, and many programs require twenty-five percent to secure the best pricing tiers. Lower down payments increase the lender's risk and make it more difficult for the property's cash flow to cover the monthly mortgage payments.

Seasoning is the amount of time you must own a property before a lender will underwrite a refinance based on the new appraised value rather than your original purchase price. For standard refinances, seasoning is typically six months. If you completed a substantial renovation that added significant value, some programs allow for shorter seasoning with proper construction documentation.

Because these loans are commercial transactions closed under a business entity, they typically do not report to your personal credit bureaus. This protects your personal debt-to-income ratio and keeps your personal borrowing capacity clear. However, the principal owners of the entity must still provide a personal guarantee, and we perform a soft credit check during underwriting to verify credit history.

When underwriting properties in designated historic districts, we evaluate the impact of local preservation rules on your renovation budget and timeline. Because historic guidelines can increase construction costs and extend municipal permit approvals, we require conservative reserve accounts to cover your holding expenses. This ensures your project remains fully funded even if local design boards delay your certificate of occupancy.