DSCR rental loans
A loan on a rental property qualified on the property’s own rent instead of your personal income. No tax returns or pay stubs; credit, assets and the appraisal are still checked. For business purposes only.
How DSCR loans work
Investment property loans
Loans for rental property and second homes.
Finance a rental or a second home with a standard mortgage, or finance a rental on the property’s own rent. Here is how the options differ and when each one fits.
Prefer to talk? Call 732-686-9999
- Direct, licensed mortgage lender
- NMLS #103098
- Equal Housing Lender
What would you like to do?
Pick the one closest to you. A few short questions follow, and a licensed loan officer gets back to you.
Get a quoteReady for the full application? Apply online
Fidelity Residential · NMLS #103098 · Equal Housing Lender
- Direct, licensed lenderNMLS #103098. Check our licences on NMLS Consumer Access.
- A licensed loan officerA real person reviews your file and answers your questions.
- Standard and rental-income loansWe compare both to find the rules that fit the property.
- Apply online or by phoneStart a quote, apply online or call 732-686-9999.
For investors
Two ways to finance a rental
A rental can be financed on your own income, like any mortgage, or on the rent the property brings in.
| Question | Standard mortgage | Rental-income (DSCR) loan |
|---|---|---|
| What the lender looks at | Your own income, debts and credit, documented with pay stubs and W-2 forms or tax returns | The property’s expected rent compared with its full monthly payment; no tax returns or pay stubs |
| The property | A rental of one to four units, under Fannie Mae or Freddie Mac rules | A rental house, condominium or small building, with larger buildings through the programs below |
| Often a fit when | Your tax returns show your income and you have few other financed properties; the agencies limit how many you can have | You own several rentals, your returns show less income after write-offs, or you hold title in a company |
| Things to weigh | Gift money cannot be used on a rental, and savings after closing are required | Most programs want landlord experience and charge a prepayment penalty in the early years, where the law allows one |
Business purpose investor loans are for investment property only.
Second homes
Financing a second home
A second home is a one-unit home you keep for your own use for part of the year, such as a vacation home. It is financed under second-home rules, which differ from the rules for a rental.
A conventional loan can buy or refinance a second home, with a fixed or an adjustable rate. A gift from a relative can help with the down payment, within the program’s rules, and you usually need some savings left after closing.
For a higher-priced home, jumbo loans also finance second homes. If you are self-employed, many alternative documentation programs allow a second home too.
What lenders look at
- Your income and debts, including the payment on the home you live in now
- Your credit and payment history
- The down payment and your savings after closing
- The home’s value
A home you rent out by the night or week is financed as a rental, not as a second home.
For investors
Rental-income loans
Loans for landlords and investors that look at the property’s rent rather than your personal income.
Short-term rentals
A home let by the night or week through booking platforms can be financed on its rental income. On a refinance, the lender looks at the property’s booking history. Expect a larger down payment than on a long-term rental, and the property must be legally permitted for short-term rental. It cannot be used as your own second home.
Short-term rental loansLarger rental and mixed-use buildings
Residential buildings of five to ten units, and small mixed-use buildings with homes and shops or offices, can be financed on the building’s rent. These loans are for experienced investors. The appraisal is more detailed, the down payment is larger, and short-term rental income is not counted.
Loans for five to ten units and mixed useBusiness purpose investor loans are for investment property only. You sign a statement that the loan is for business purposes and that no one on the loan will live in the property.
More options
More financing for investors
For properties that need work, several rentals at once, properties other programs turn down, and buyers who live abroad.
Fix and flip and bridge loans
Short-term financing to buy and renovate a property, then sell it or refinance it into a long-term loan. Renovation money is released in draws as the work is done. For business purposes only.
Fix and flip and bridge loansSeveral rentals in one loan
For experienced investors, some programs finance several rental homes in the same state under one loan, based on their combined rent. A property can be released from the loan when you sell it, on terms set in the loan.
Portfolio rental loansPortfolio adjustable-rate loans
Some lenders keep loans on their own books and set their own rules. That can help with properties other programs turn down, such as some condominiums, co-ops and mixed-use buildings, held in your own name or a limited liability company. These loans are adjustable: the rate is fixed for a set number of years and then can change every year, so the payment can rise. Income, assets and credit are fully documented.
Portfolio adjustable-rate loansBuyers who live abroad
A buyer who lives outside the United States may be able to finance a rental property or a second home, including at jumbo sizes, through a portfolio adjustable-rate loan, with income and assets documented and a larger down payment.
Portfolio adjustable-rate loansBusiness purpose investor loans are for investment property only.
How it works
The steps to a rental-income loan
Tell us about the property
The address, the number of units, whether it is rented or vacant, long-term or short-term, and how you want to hold title.
Credit and experience
A credit report for each borrower or guarantor, recent mortgage or rent payments, and proof of landlord experience where the program asks for it.
Appraisal and rent
A full appraisal with a market rent schedule, plus the current lease on a refinance or the booking history for a short-term rental.
Terms and closing
The rent compared with the payment sets the loan’s terms. You sign the business-purpose and occupancy statements and, for a company, a personal guarantee.
Documents
What investors need
Most investors can start with these.
- Property details and current leases or a rent roll
- Booking platform statements for a short-term rental you already run
- Bank statements for the down payment, closing costs and savings after closing
- Company documents, such as formation papers and the operating agreement, if a company will hold title
- Pay stubs and W-2 forms, or tax returns, only if you choose a standard mortgage
- Photo identification for each borrower and guarantor
Title in a company
Borrowing in an LLC: rental loans for a limited liability company
Yes, you can buy or refinance a rental in a limited liability company and still finance it. A rental-income (DSCR) loan or a portfolio rental loan can close in the company’s name. The owners give a personal guarantee, and their credit is reviewed alongside the property, the rent and the reserves. The company holds title, but it does not take you out of the picture.
On a standard mortgage, title is normally held in your own name; see DSCR or conventional for how the two compare.
This is general information, not tax or legal advice. Your CPA and attorney should weigh in on how you hold the property.
What the lender asks for from your company
- The papers that formed the company and its operating agreement
- Its tax identification number
- Proof it is in good standing where it was formed
- A current list of every owner
- Photo identification and permission to check credit for each owner who signs the guarantee
- The property’s details, and its lease or rent if it is already let
A worked example, in words. Say you own two rentals in your own name and are buying a third, a two-family house, and your attorney suggests holding it in a new limited liability company.
- Decide before closing. Settle with your CPA and attorney how the company will be taxed, who its members are, whether each property gets its own company, and how the insurance will be written. Deciding before closing is far simpler than changing how title is held afterwards.
- Check that the company fits the program. Programs set limits on how the company can be set up, such as the number of members and whether one company is owned by another, so ask your loan officer before you form it.
- The loan. A rental-income (DSCR) loan compares the property’s expected rent with its full monthly payment, including taxes, insurance and any association dues. The rent of both units counts. No tax returns or pay stubs.
- The owners. Each owner who signs gives a personal guarantee and has their credit checked, along with the property, the rent and the reserves.
- At closing. Title is in the company’s name. You sign statements that the loan is for business purposes and that nobody on the loan will live in the property.
- As you grow. If you later want several rentals under one loan, a portfolio rental loan finances several rental homes in the same state, with title held by a business entity.
The DSCR calculator shows whether the rent covers the payment, and the rental deal analyzer tests the whole deal. Both are estimates, not decisions.
Where each loan fits: a single rental house, condominium or small building on a DSCR loan (for a New Jersey rental, see DSCR loans in New Jersey); several rentals together on a portfolio rental loan; buildings of five to ten units on loans for larger buildings. More in buying a rental in an LLC.
Business purpose investor loans are for investment property only.
Questions
Common questions about investment property loans
Can I live in a property financed with an investor loan?
No. Rental-income and other business purpose loans are for investment property only, and no one on the loan or in their family may live in it, even for part of the year. For a home you will use yourself, see second homes above or buying a home.
Can my company hold title?
Rental-income loans can usually close in the name of a limited liability company or corporation, with the owners giving a personal guarantee. Ask a loan officer how title would be held on a standard mortgage.
Do I need landlord experience?
Most rental-income programs want some, and loans on buildings of five or more units are for experienced investors. Some programs accept first-time investors on tighter terms.
Can I take cash out of a rental I own?
Yes. Standard mortgages and rental-income loans both offer cash-out refinances on rental property, within each program’s limits.
Is there a prepayment penalty?
Most rental-income programs charge one if the loan is paid off in its early years, where the law allows it, and some let you choose a loan without one. Ask for the terms in writing before you sign.
Can I get a loan for a rental property in an LLC?
Yes. Rental-income (DSCR) loans and portfolio rental loans can close in the name of a limited liability company, with the owners giving a personal guarantee. The loan is for business purposes, on investment property nobody on the loan will live in. See DSCR loans and portfolio rental loans.
If my LLC takes the loan, does the lender still look at me?
Yes. The owners sign a personal guarantee, and the lender checks the credit of each owner who signs. Those personal profiles are part of how the loan is reviewed and how its terms are set. The company holds title, but the people behind it still stand behind the loan.
What documents does the lender need from my LLC?
The papers that formed the company, its operating agreement, its tax identification number, proof that it is in good standing where it was formed, and a current list of every owner. Every owner who signs provides identification and goes through a credit check. The rest of the file is the same as on any rental-income loan.
Can I form a new LLC for the purchase?
Yes. Some investors keep a first rental in their own name and form a company as they grow; others start with one. Programs set limits on how the company can be set up, such as the number of members and whether one company is owned by another, so ask your loan officer before you form it.
Can I move a rental I already own into an LLC?
Ask your attorney before you transfer it, because a transfer can matter for your current mortgage, your insurance and your title. Changing how title is held after closing is far harder than deciding before, so if you plan to refinance, raise it with your loan officer early: a rental-income loan can close in a company’s name.
Can several rentals sit in one LLC under one loan?
For experienced investors, some programs finance several rental homes in the same state under one loan, based on their combined rent, with title held by a business entity. A property can be released from the loan when you sell it, on terms set in the loan. See portfolio rental loans.
Can a corporation hold title instead of an LLC?
Programs commonly allow a limited liability company, and some allow a corporation. Ask before you set one up for the purchase.
Does borrowing through an LLC keep the loan off my credit?
Not on its own. The owners give a personal guarantee and their credit is reviewed. How the loan is reported depends on the lender and the loan; ask your loan officer.
Do you lend in my state?
Fidelity Residential is licensed in many states. The full, current list is on NMLS Consumer Access (opens in a new tab), or call us at 732-686-9999. Business purpose loans follow their own list of states; a loan officer can confirm it for your property.
Have a property in mind?
Get a quote, apply online, or talk it through with a licensed loan officer.
Business purpose investor loans are for investment property only.
This page is general information, not a commitment to lend. Programs, terms and eligibility depend on credit, income, property and underwriting review and are subject to change without notice.
Reviewed by Robert Shamie, CEO, NMLS #241428 · Last reviewed:
Fidelity Residential (PFN Lending Group, Inc., NMLS #103098) is a direct mortgage lender licensed in 40 states and the District of Columbia, with 26 years in business.