Model house on calculator with scattered coins, representing rental income and DSCR loan qualification in Colorado

If you’re a real estate investor in Centennial, Denver, or anywhere in Colorado, you may have heard about DSCR loans. These loans are becoming more popular because they make it easier for investors to qualify without relying on personal income or tax returns.

DSCR stands for Debt Service Coverage Ratio, and here’s how it works.

What is a DSCR loan?

A DSCR loan is a type of mortgage that uses the income from the investment property, not your personal income, to qualify. The key number lenders look at is the property’s debt service coverage ratio, which compares the monthly rental income to the monthly mortgage payment.

If the rental income covers the mortgage (a DSCR of 1.0 or higher), you may qualify for financing. Some lenders even allow slightly lower ratios depending on the strength of the deal or your reserves.

This is especially helpful for:

  • Self-employed investors
  • Investors with multiple properties
  • Buyers who don’t want to use personal tax returns
  • Investors building long-term rental portfolios

What do lenders look for?

Here’s what typically matters in a DSCR loan:

  • A minimum DSCR, usually 1.0 or above, but some lenders will go as low as 0.75.
  • A solid appraisal with market rent analysis (1007)
  • A decent credit score, often 620 or higher
  • A down payment, typically starting at 20 to 25%

The good news is there’s no employment verification or income documentation needed. Instead, it’s all about the property’s ability to pay for itself.

Investopedia offers a helpful breakdown of how the DSCR formula works for investors.

Why investors in Colorado are using DSCR loans

In high-demand areas like Centennial, Castle Rock, Aurora, and Colorado Springs, rental income often supports a strong DSCR. If you’ve found a property with solid cash flow or even one that will after short-term improvements, this type of loan could be a great fit.

DSCR loans can also be helpful when traditional lenders say no because of write-offs or complex financials.

The Federal Housing Finance Agency (FHFA) and Fannie Mae don’t back these loans, so they’re offered through non-QM lenders with flexible guidelines designed for real estate investors.

Is a DSCR loan right for you?

The best way to find out is to run the numbers. If the rental income on the property you’re buying or refinancing comes close to or exceeds the mortgage payment, you might qualify even without showing any personal income.

I help investors all over Colorado structure deals with DSCR financing, and I’m happy to help you explore whether it’s a good fit for your strategy.

Call or text me at 303-670-0137, email rbaxter@choicemortgage.com, or reach out here. Let’s take a look at your next property and see what’s possible.

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