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DSCR rental loans in Massachusetts
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 Massachusetts those rules are set city by city and town by town. Boston limits short-term rentals to owner-occupied homes, so investor-owned short-term rentals are usually found in markets such as Cape Cod, the Islands and the Berkshires. 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.