Who Qualifies for a DSCR Loan in Colorado?
If you’re a real estate investor in Centennial, Castle Rock, Parker, or anywhere in Colorado, you may have heard about DSCR loans. These loans are growing in popularity because they make it easier to qualify without needing traditional income documentation.
So who qualifies for a DSCR loan in Colorado? Let’s break it down.
What is a DSCR loan?
DSCR stands for Debt Service Coverage Ratio. These loans are designed for real estate investors and are based on the income the property generates — not your personal income or tax returns.
Lenders calculate the DSCR by dividing the property’s monthly rental income by its monthly mortgage payment. For example, if the property brings in $2,000 in rent and the mortgage payment is $1,800, the DSCR is 1.11.
Generally, a DSCR of 1.0 or higher is needed to qualify.
Investopedia has a helpful breakdown of how DSCR is calculated.
Who typically qualifies for a DSCR loan?
You may qualify for a DSCR loan if:
- You are purchasing or refinancing an investment property
- The property generates consistent rental income
- You have a DSCR of at least 1.0 (some lenders allow slightly lower)
- You have a credit score of around 620 or higher
- You can make a 20 to 25 percent down payment (for purchases)
There’s no employment verification, tax returns, or debt-to-income ratio review. That’s why these loans are often a fit for:
- Self-employed investors
- Business owners
- Real estate investors with complex finances
- Buyers scaling a rental portfolio
What types of properties are eligible?
Most lenders offer DSCR loans on:
- Single-family rentals
- 2-4 unit properties
- Condos
- Some short-term rentals (Airbnb/VRBO)
The key is whether the rental income supports the mortgage payment. The better the cash flow, the more likely you are to qualify.
The Mortgage Reports and CFPB can also provide insight into investment loan structures, but DSCR loans are usually available only through non-QM lenders like Choice Mortgage Group.
Is a DSCR loan right for you?
If you want to invest in Colorado real estate without the paperwork that comes with traditional mortgages, a DSCR loan might be worth exploring. Whether you’re buying your first rental or expanding a portfolio, I can help you figure out if it makes sense based on your goals.
Call or text me at 303-670-0137, email rbaxter@choicemortgage.com, or connect here. I help real estate investors in Centennial, Denver, Highlands Ranch, and throughout Colorado explore smart loan strategies for building long-term wealth.
