If the property cash flows, it can qualify. Ambition Lending's DSCR program is built for investors who want long-term rental financing without income verification, whether you're buying your first rental, refinancing out of a hard money loan after a rehab, or pulling cash out to buy the next one.
DSCR loan program at a glance
| Loan size | From $100,000 |
|---|---|
| Qualification | Property cash flow — typically 1.0x DSCR or higher; no personal income documents |
| Terms | 30-year fixed or adjustable-rate options |
| Loan purposes | Purchase, rate-and-term refinance, cash-out refinance |
| Property types | 1–4 unit rentals, condos, townhomes, small multifamily, short-term rentals |
| Borrower | LLC or individual investor; business-purpose only |
| Markets | Nationwide, including metropolitan, suburban and rural markets |
| Prepayment | Options with or without a prepayment penalty |
Leverage and rate depend on the DSCR, credit, property and loan purpose; your term sheet states them, usually within 24 hours.
How DSCR is calculated
DSCR = monthly rent ÷ monthly PITIA (principal, interest, taxes, insurance and HOA). $2,400 rent against a $1,980 payment is a 1.21 DSCR. Check a property in the DSCR calculator, and read DSCR loans explained for the full walkthrough.
DSCR cash-out refinance
Buying a vacant rental? See how a DSCR loan works on a vacant property.
Looking at an apartment building? See how DSCR works on a 5+ unit multifamily property.
Planning your cash? See how much down payment a DSCR loan requires.
Closing in an entity? See how a DSCR loan works in an LLC.
Pull equity out of a stabilized rental without income documents. The new loan is sized on today's appraised value and limited by rent coverage; after paying off the old loan and closing costs, the rest is yours to redeploy. See DSCR cash-out refinance: requirements and how it works, seasoning rules and the BRRRR calculator.
How are DSCR loan rates set, and do prepayment options change them?
A DSCR loan rate is built from a market benchmark plus adjustments for the risk of your specific file, and the prepayment option you choose is one of those adjustments. Ambition Lending does not publish a standard DSCR rate; your term sheet, usually within 24 hours on most requests, states the pricing for your property.
The benchmark. Fixed-rate loans are priced off long-term borrowing costs, which investors can follow through the 10-year Treasury yield published by the Federal Reserve Bank of St. Louis (FRED) and the Freddie Mac Primary Mortgage Market Survey, which tracks 30-year mortgage averages for owner-occupied homes. Adjustable-rate options are commonly tied to a short-term index such as the Secured Overnight Financing Rate (SOFR), published by the Federal Reserve Bank of New York. Investment-property loans price above those owner-occupied averages, so use them as a direction signal, not a quote.
The file adjustments. On top of the benchmark, a lender weighs:
- DSCR. A property whose rent covers the payment with room to spare is a lower risk than one at 1.0x. See how DSCR is calculated and test yours in the DSCR calculator.
- Leverage. A bigger down payment lowers the lender's exposure. See DSCR down payment.
- Credit and reserves. The guarantor's credit history and post-closing liquidity.
- Loan purpose. A purchase, a rate-and-term refinance and a cash-out refinance are often priced differently.
- Property and use. A long-term lease on a single-family home is a different risk from a short-term rental with variable bookings.
- Prepayment option. Covered next.
What is a prepayment penalty on a DSCR loan?
A prepayment penalty is a fee, usually a percentage of the balance that steps down each year, if you pay the loan off early by selling or refinancing. Ambition Lending's DSCR program has options with or without one. Lenders often price a penalty option differently from a no-penalty option because the penalty compensates them if the loan does not last. Whether a penalty lowers your rate, and by how much, is stated on your term sheet.
Consumer-loan limits on prepayment penalties come from rules that exempt business-purpose credit: Regulation Z, 12 CFR 1026.3(a), excludes credit extended primarily for a business purpose. A DSCR loan on a rental is a business-purpose loan, so your loan documents, and any state law that applies, set the rules. Read the prepayment clause before you sign.
Hypothetical: what a step-down penalty costs against a rate saving
This is a hypothetical example for illustration, not a quote. Assume a $300,000 balance, a 5-4-3-2-1 step-down schedule (5% in year one down to 1% in year five), and, purely for the math, that choosing the penalty option lowers the rate by 0.25 percentage points, which saves about $750 a year in interest.
| Payoff in | Penalty % | Penalty on $300,000 | Rate saving to date (about) |
|---|---|---|---|
| Year 1 | 5% | $15,000 | $750 |
| Year 2 | 4% | $12,000 | $1,500 |
| Year 3 | 3% | $9,000 | $2,250 |
| Year 4 | 2% | $6,000 | $3,000 |
| Year 5 | 1% | $3,000 | $3,750 |
In this hypothetical, the penalty option only wins if you hold past the schedule, because the saving accrues slowly while the penalty is largest early. The lesson is general: match the option to your plan. A buy-and-hold investor with no plan to refinance may accept a penalty for a lower rate. A BRRRR investor who expects to refinance or sell within a couple of years should price the no-penalty option and compare total cost, not rate alone. Compare it with the prepayment terms on short-term hard money loans, which work differently.
How to compare two DSCR quotes
- Ask for the same loan amount and property on both a penalty and a no-penalty option.
- Write down the penalty schedule and what triggers it (sale, refinance, partial paydown).
- Estimate how long you will actually hold the property.
- Add the points and closing costs to each option, then compare total cost over that hold.
How much down payment does a DSCR loan require?
There is no single percentage: your down payment is the purchase price minus the loan, and the loan is the smaller of two limits — the lender's maximum loan-to-value for your file (set by credit, property type and loan purpose) and the largest loan the rent can support at the required DSCR. In high-price, low-rent markets the rent limit is usually the one that binds, so the down payment is larger than investors expect.
| Example (illustration, not a quote) | |
|---|---|
| Purchase price | $400,000 |
| Market rent | $2,900 a month |
| Taxes + insurance + HOA | $520 a month |
| Largest loan at a 1.25x DSCR (7.5%, 30 years) | about $257,000 |
| Largest loan at a 1.0x DSCR | about $340,000 |
| Down payment if the lender sizes to 1.25x | about $143,000 (36%) — plus closing costs and reserves |
Run your own property in the DSCR calculator, which shows the largest loan at 1.0x and 1.25x. The full guide, including cash to close and reserves, is how much down payment a DSCR loan requires.
DSCR loan guides
Everything we publish on DSCR loans, in the order most investors need it.
| Question | Guide |
|---|---|
| What is a DSCR loan and how is it calculated? | DSCR loans explained |
| What do lenders require? | DSCR loan requirements |
| How much do I need down? | DSCR down payment |
| Can I use it for an Airbnb or short-term rental? | DSCR loans for Airbnb and short-term rentals |
| Can I borrow in an LLC? | DSCR loans in an LLC |
| What if the property is vacant or has no rental history? | DSCR loans on vacant property |
| Does it work for 5+ unit buildings? | DSCR loans for 5+ units |
| Can I take cash out? | DSCR cash-out refinance and seasoning rules |
| How do I refinance a flip or BRRRR into DSCR? | BRRRR financing |
| New construction? | Build with a construction loan, then refinance into DSCR once it has a certificate of occupancy and a tenant |
| Arizona and Phoenix rentals | DSCR loans in Arizona, Maricopa County city by city, Tempe and Flagstaff |
| What will the rent support? | DSCR calculator (largest loan at 1.0x and 1.25x) |
| Bridge first or DSCR now? | Bridge loan vs. DSCR loan |
Who DSCR loans are for
- Self-employed investors whose tax returns understate rental income.
- Investors scaling past conventional limits on financed properties.
- BRRRR investors refinancing out of a fix and flip or rehab-to-rent loan — see when to refinance into DSCR.
- Short-term rental owners — see short-term rental financing options.
What to send
- Property address and purchase contract or current payoff.
- Lease(s) or expected rent; short-term rental history if applicable.
- Taxes, insurance quote and HOA dues.
- Entity documents and guarantor ID.
More: DSCR loan requirements for first-time investors, DSCR vs. conventional loans, rental underwriting beyond DSCR. Get a DSCR term sheet.
Frequently asked questions
How much down payment does a DSCR loan require?
There is no single percentage. The down payment is the purchase price minus the loan, and the loan is the smaller of two limits: the lender's maximum loan-to-value for your file and the largest loan the rent supports at the required DSCR. Plan for closing costs and reserves on top. Your term sheet states the exact figure.
What DSCR do I need?
Most properties qualify at a 1.0x DSCR or higher, meaning rent covers the full payment (principal, interest, taxes, insurance and HOA). Some cases allow lower with pricing adjustments; higher ratios usually earn better terms.
Do I need to show tax returns or pay stubs?
No personal income or employment documentation is required. We review the property's rent, the appraisal, credit, reserves, insurance and title.
Can I do a cash-out refinance with a DSCR loan?
Yes. A DSCR cash-out refinance pays off your current loan and returns equity as cash, sized on the appraised value and limited by whether the rent covers the new payment.
What properties qualify?
1–4 unit rentals, condos, townhomes and small multifamily, including short-term rentals where local rules allow them.
Can I close in an LLC?
Yes. DSCR loans are business-purpose loans and commonly close in an LLC with a personal guarantee.
Can I get a DSCR loan for an Airbnb or short-term rental?
Often, yes, where local rules allow short-term rentals. We may use booking history, a market projection or long-term market rent, and we check permit and HOA status.
Can I get a DSCR loan on new construction?
Once the home is complete, has a certificate of occupancy and is ready to rent, yes. To build it, use a construction loan with staged draws, then refinance into a DSCR loan when it's leased.
Do you make DSCR loans in Arizona?
Yes, statewide, including Phoenix, Tempe, Maricopa County, Tucson and rural Arizona.
How are DSCR loan rates set?
Pricing reflects the benchmark the loan is tied to, plus risk adjustments for the DSCR, loan-to-value, credit, loan purpose, property type, loan size and the prepayment option you choose. Your term sheet states the rate for your file; we do not publish a standard DSCR rate.
Does a prepayment penalty change my DSCR loan rate?
It can. Lenders often price a loan with a prepayment penalty differently from one without, because the penalty protects them if you pay off early. Ambition Lending offers options with or without a prepayment penalty, so ask for both on the term sheet and compare the total cost over your planned hold.
Is a DSCR loan prepayment penalty limited by federal law?
Federal consumer rules in Regulation Z do not apply to business-purpose credit, so the consumer-loan limits on prepayment penalties generally do not govern a DSCR loan on an investment property. State law and your loan documents control, so read the prepayment clause before you sign.
Updated by the Ambition Lending credit team.
