Case Study: Real Estate Investor Qualifies for $1.2M DSCR Loan Based on Rental Income

The Borrower Profile

Name: Sarah M. (anonymized) Occupation: Real Estate Investor & Property Manager Loan Amount: $1,200,000 (for 3 properties) Properties: Multi-family investment properties in Denver, Colorado Credit Score: 720 Down Payment: 25%

The Challenge

Sarah had been investing in real estate for 6 years and owned 2 rental properties generating strong cash flow. She identified 3 additional multi-family properties that would generate excellent returns. However, her personal W-2 income as a property manager was only $65,000 annually—far below what she needed to qualify for conventional investment property financing.

Traditional lenders require that borrowers qualify based on personal income, not rental income. Sarah's portfolio was strong, but conventional lenders wouldn't count the rental income from her existing properties toward qualification for new loans.

The Solution: DSCR Loan

DSCR (Debt Service Coverage Ratio) loans are specifically designed for investment properties and qualify borrowers based on the property's rental income, not personal income. Sarah applied for three separate DSCR loans:

Property 1: Duplex in Denver - **Purchase Price:** $385,000 - **Loan Amount:** $289,000 (75% LTV) - **Estimated Annual Rental Income:** $42,000 - **DSCR:** 1.45 (excellent)

Property 2: Triplex in Denver - **Purchase Price:** $450,000 - **Loan Amount:** $337,500 (75% LTV) - **Estimated Annual Rental Income:** $54,000 - **DSCR:** 1.60 (excellent)

Property 3: 4-Plex in Denver - **Purchase Price:** $520,000 - **Loan Amount:** $390,000 (75% LTV) - **Estimated Annual Rental Income:** $72,000 - **DSCR:** 1.54 (excellent)

The Application Process

Documentation Provided

1. Rent rolls for all 3 properties showing current and projected rental income
2. Lease agreements for existing and projected tenants
3. Property appraisals for all 3 properties
4. 2 years of personal tax returns (for reference)
5. Existing property financials showing actual cash flow performance
6. Personal credit report and assets (showing financial stability)
7. Proof of funds for down payments and closing costs

Timeline

• Day 1: Application submitted for all 3 properties
• Day 7: Appraisals ordered and underwriting begins
• Day 14: Appraisals received, underwriting requests additional documentation
• Day 18: All conditions satisfied, clear to close
• Day 28: All 3 loans close simultaneously

The Results

Total Loan Amount: $1,016,500 across 3 properties Interest Rates: 7.50% - 7.75% (30-year fixed) Combined Monthly Payment: $7,450 Combined Annual Rental Income: $168,000 Combined DSCR: 1.53 (excellent)

Why This Worked

1. Strong DSCR ratios — All three properties had DSCR above 1.50, indicating strong cash flow
2. Proven track record — Sarah's existing properties showed she could manage investments successfully
3. Conservative underwriting — DSCR loans typically use conservative rent estimates (often 70-80% of market rent)
4. Good credit — Sarah's 720 credit score demonstrated financial responsibility
5. Adequate down payment — 25% down on each property reduced lender risk

Key Lessons for Real Estate Investors

DSCR loans don't require personal income. This is the biggest advantage—your W-2 income doesn't matter. What matters is the property's ability to generate rental income.

Conservative rent estimates are standard. Lenders typically use 75% of market rent or actual lease rates (whichever is lower) to be conservative. Plan accordingly.

DSCR above 1.25 is typically required. Most lenders require a minimum DSCR of 1.20-1.25. Sarah's ratios of 1.45-1.60 were excellent and helped her get favorable terms.

Multiple properties can be financed simultaneously. Sarah was able to close all 3 properties at once, which simplified the process and allowed her to move quickly on the deals.

DSCR loans have longer terms. Most DSCR loans are 30-year fixed, but some lenders offer 25-year or 20-year options. Sarah chose 30-year to maximize cash flow.

Next Steps

If you're a real estate investor looking to expand your portfolio, DSCR loans can be a game-changer. Focus on properties with strong rental income and conservative DSCR ratios above 1.25.