Ready to move beyond the 1-4 unit rental market and scale your real estate portfolio? The Debt Service Coverage Ratio (DSCR) loan is the key to unlocking financing for those strategically valuable 5-10 unit multifamily properties.
This specialized financing is a game-changer for serious investors, allowing you to qualify based on the property's potential cash flow, not just your personal income. If you're looking for a loan up to $3 million with up to 75% Loan-to-Value (LTV) and meet a 680 minimum credit score, this guide is for you.
DSCR loans are a form of Non-Qualified Mortgage (Non-QM), designed specifically for real estate investors. The core principle is simple: the property pays for itself.
Instead of scrutinizing W-2s, tax returns, and a strict Debt-to-Income (DTI) ratio, the lender focuses on the property's ability to generate enough income to cover its debt payments.
The lender calculates the Debt Service Coverage Ratio (DSCR) to determine eligibility:
What DSCR means:
Many lenders require a DSCR of $1.0$ or higher for 5-10 unit properties, though some programs may accept lower ratios with a higher credit score or larger down payment.
The following parameters define the typical sweet spot for DSCR loans on 5-10 unit multifamily assets, offering flexibility and powerful leverage.
This loan is perfectly positioned to finance the asset class that bridges residential and commercial lending. Properties with 5 to 10 units often fall into a financing gap, which DSCR loans seamlessly fill. This allows you to scale your portfolio with small apartment buildings or large multi-unit complexes, often without the complexity of traditional commercial bank loans.
Your minimum credit score of 680 positions you as a strong borrower in the DSCR landscape. A higher score will often translate to more favorable terms, including potentially lower interest rates or a less stringent DSCR requirement. While the loan focuses on the property's cash flow, your credit history demonstrates your financial reliability.
With up to a 75% LTV for a purchase, you can secure the property with a 25% down payment. This level of leverage is highly competitive, allowing you to maximize your purchasing power and free up capital for other investments or property improvements.
Whether you're targeting a single large building or a portfolio of smaller assets, a maximum loan amount of $3 million provides substantial purchasing power for high-value properties in competitive markets.
Lenders typically require proof of 6 months of reserves for loans of this size. Reserves are funds held in liquid accounts (checking, savings, investment accounts) equal to a specific number of months of the proposed Principal, Interest, Taxes, and Insurance (PITIA) payments. This ensures you have a cushion to cover payments in the event of a vacancy or unexpected expenses.
If your next move is a 5-10 unit multifamily property, the DSCR loan structure, with its focus on cash flow and flexible qualification, is your most powerful tool.
1. Calculate Your DSCR: Get an estimate of the expected market rent for the property. A local appraisal is the best starting point for accurate numbers.
2. Gather Documentation: Focus on the property's details (rent rolls, market rent appraisals) and proof of your 680+ credit score and 6 months of reserves.
3. Partner with a Specialized Lender: DSCR loans are Non-QM products, so work with a lender experienced in non-traditional and commercial-adjacent investor financing to navigate the best terms for your $3 million, 75% LTV goal.
Ready to take your investing to the next level?
