Home / Loan programs / DSCR rental loans
DSCR loans for Houston rental property
Long-term financing approved on what the property earns. Single-family rentals, duplexes to fourplexes, townhomes and build-to-rent homes, with no tax returns or employment check.
DSCR loan terms
| To buy | up to 85% LTV |
| Cash-out refinance | up to 80% LTV |
| Credit scores from | 600 |
| Fixed terms | 5 to 30 years |
| Prepayment choices | 3-year, 5-year or none |
| Typical closing | about 30 days |
At a 600 score the limit is 70% loan-to-value. Stronger credit qualifies for up to 85% on a purchase.
DSCR in plain terms
DSCR is short for debt service coverage ratio. It answers one question: does the rent pay the mortgage? If it does, the loan can be approved without looking at your personal income.
DSCR = monthly rent ÷ monthly payment. The payment counts principal, interest, property taxes, insurance and any homeowners association fee.
| Rent | Payment | DSCR | Reading |
|---|---|---|---|
| $2,860 | $2,200 | 1.30 | Income is 30% above the payment |
| $2,200 | $2,200 | 1.00 | Income equals the payment |
| $1,980 | $2,200 | 0.90 | Income is short; expect less leverage or a higher rate |
We prefer a ratio of 1.0 or higher. A strong borrower can qualify under 1.0 with lower leverage, and there is a no-DSCR option up to 75% loan-to-value at a higher rate.
Why taxes and insurance matter so much in Texas
- Property tax. Texas has no state income tax, so local governments rely on property tax. Combined rates in Harris County are often 2% to 2.5% of value, and in suburbs served by a municipal utility district (MUD) they can reach 3% or more. Investment property gets no homestead exemption. For the 2024 to 2026 tax years, the taxable value of non-homestead property worth $5 million or less can rise no more than 20% a year, but the limit resets when the property is sold, so a new buyer is taxed on full market value.
- Insurance. Hurricane wind, hail and flood drive insurance costs across the Houston area, and flood insurance is a separate policy. In coastal areas such as Galveston and parts of southeast Harris County, wind coverage often comes from the Texas Windstorm Insurance Association, which requires inspected work. Get insurance quotes, including flood, before you make an offer.
- HOA fees. Most master-planned communities in Katy, Cypress, The Woodlands and Pearland have association dues. They count in the payment.
- Flood. Flooding is the defining risk in Houston. Since 2018, new homes and substantially improved homes inside the city’s 100-year and 500-year floodplains must be built 2 feet above the 500-year flood elevation, and many houses that flooded in Hurricane Harvey or earlier storms carry a history buyers and insurers will ask about. Texas sellers must disclose flood history, and landlords must tell tenants whether a rental is in a 100-year floodplain and whether it has flooded in the past five years. Check the flood maps, the elevation and the flood history before you make an offer.
Use the tax bill at full market value, not the seller’s capped or homestead figure, and get a real insurance quote before you make an offer. Those numbers decide whether many Houston rentals clear 1.0.
Which rent counts
- Long-term rentals. Year-long leases are the core of the market, with demand from the region’s large and growing workforce in energy, health care and the port. We use the lease or the market rent from the appraisal.
- Duplexes to fourplexes. Every unit’s rent counts.
- Short-term rentals. Houston has no zoning, so short-term rentals are not banned by neighborhood, but since January 1, 2026 every short-term rental in the city must hold a city registration, renewed each year for $275, and pay state and city hotel occupancy tax, with fines of up to $500 a day for violations. Many subdivisions and master-planned communities restrict short stays in their deed restrictions, and suburbs such as Sugar Land, Katy and League City have their own rules. We underwrite on long-term rent unless the address can legally host short stays and the numbers work without them.
- Rental rules. Texas law bars cities from adopting rent control, so rents follow the market, and Houston has no citywide rental registration for long-term leases. Texas landlord rules, such as the flood disclosure in every residential lease, still apply.
Loan options
- Fixed terms from 5 to 30 years. The 10/1 interest-only and the 30-year fully amortized loan are chosen most often.
- Qualifying on the interest-only payment is available.
- A 3-year or 5-year prepayment penalty. The 5-year option usually prices about 0.25 to 0.5% lower. No penalty is available at a higher rate.
- One property or a whole portfolio.
Refinancing after a renovation or a build
If you renovate or build a property and decide to keep it, a DSCR loan replaces the short-term fix and flip or construction loan with long-term debt. A cash-out refinance at up to 80% loan-to-value can hand back much of the cash you put in. Texas restricts cash-out loans on homesteads, but those rules do not apply to investment property.
Documents we ask for
- Loan application
- Signed purchase contract, or your original settlement statement for a refinance
- The lease, or market rent from the appraisal
- Two months of bank statements
- Insurance and title contacts, and someone to let the appraiser in
- For a property in an association: the HOA dues and any special assessments
- For an LLC: certificate of formation, EIN letter and company agreement
The full list is in our hard money loan document checklist.
DSCR loans: common questions
We prefer 1.0 or higher, which means the rent covers the full payment. Strong borrowers can qualify below 1.0 with lower leverage, and a no-DSCR program is available up to 75% loan-to-value at a higher rate.
Usually we underwrite on long-term rent. Houston requires every short-term rental to register with the city, and many deed restrictions ban short stays. Ask us about a specific address.
Most often it is property tax or insurance. A new owner is taxed on full market value without a homestead exemption, and wind, hail and flood coverage is expensive in the Houston area. In a MUD, the district’s tax adds to the bill.
Yes, up to 80% loan-to-value. Texas’s special cash-out rules apply to homesteads, not to investment property.
The minimum is 600, at up to 70% loan-to-value. Higher scores qualify for up to 85% of the purchase price.
No. A DSCR loan is approved on the property’s rental income. There is no employment, tax return or debt-to-income review.
No. These are business-purpose loans and are not reported on your personal credit like a conventional mortgage. There is no cap on how many properties we will finance for you.
Buying or refinancing a Houston rental?
Send the address, the price and what you plan to do with the property. We will reply with the leverage and pricing that fit your deal.