When it comes to real estate investment, a DSCR loan has become a go-to option for many investors who want flexible lending options based on property income rather than personal income. But one of the most common questions asked is: How much down payment is required on a DSCR loan?
Understanding the down payment requirements can help you plan your investment better, especially if you’re buying rental properties or expanding your portfolio.
What is a DSCR Loan?
DSCR stands for Debt Service Coverage Ratio. This type of loan is primarily designed for real estate investors and is based on the income the property generates, not your personal income or tax returns. In simple terms, lenders look at whether the rental income from the property can cover the monthly loan payment.
For example, if your property earns $2,000 a month in rent and your monthly mortgage payment is $1,500, your DSCR would be 1.33. That shows the property generates more income than the loan requires, which is good for lenders.
General Down Payment Requirements
In most cases, DSCR loans require a down payment between 20% and 30% of the property’s purchase price. The exact percentage depends on factors such as:
- The location of the property
- Property type (single-family, multi-unit, commercial)
- Borrower’s credit score
- Lender’s internal criteria
Some lenders might allow a 15% down payment if the rest of your profile is strong, but 20%-25% is the standard starting point.
Why DSCR Loans Require Higher Down Payments
Since DSCR loans are not based on personal income or employment, they are considered riskier than traditional loans. To balance this, lenders ask for a larger down payment. This helps reduce their risk while giving you access to funding without needing tax returns or proof of employment.
Also, the property itself acts as the main qualifying factor, so a larger equity cushion gives the lender more security.
If you’re considering taking advantage of a DSCR loan service in Baltimore MD, you’ll want to be prepared with at least 20% of the purchase price in hand.
Other Costs to Consider
Along with your down payment, you should also plan for:
- Closing costs (2%–5% of the loan amount)
- Appraisal fees
- Title and inspection costs
- Property insurance and taxes
Some lenders may also charge points (a fee paid to get a lower interest rate), especially if your DSCR is borderline or your credit score needs improvement.
Credit Score & DSCR Ratio Requirements
Though personal income isn’t checked, your credit score still matters. Most lenders prefer a score of at least 660. The higher your credit score, the better your chances of getting favorable terms. Also, lenders often want a DSCR of at least 1.0, which means your rental income should cover your loan payment. A DSCR of 1.25 or higher will put you in a stronger position and might even help you negotiate a lower down payment
How to Improve Your Chances of Approval
Here are a few ways to increase your chances of qualifying and possibly lower your down payment:
- Invest in properties with strong rental history or potential
- Maintain a good credit score
- Be ready with a detailed rental income analysis
- Choose the right lender who understands investor needs
Trusted Support for DSCR Loans
Many investors today prefer working with companies that understand the unique needs of real estate financing. One such name in the market is Efundhomes LLC. Their experience in handling DSCR loans and investor-focused property funding has made them a trusted option. Clients report that the process is smooth, and their team provides clear guidance, especially for new investors.
Final Thoughts on DSCR Loan Down Payments
To sum up, most DSCR loans require a down payment of 20% to 30%, depending on property type, location, and your financial profile. Being prepared with a solid down payment improves your chances of approval and gives you more negotiating power with lenders.
If you’re planning to invest, especially in areas like Baltimore, it’s smart to compare options and choose a lender who understands your goals. You can explore tailored DSCR loan service in Baltimore MD that fit both your property and financial plans.
Whether you’re starting your real estate journey or expanding your portfolio, partnering with an experienced company can make a big difference. Several investors have shared positive experiences working with Efundhomes LLC, thanks to their investor-first approach and expert DSCR guidance.
