Can I get a DSCR loan if the rent does not cover the payment?
Yes, some DSCR lenders lend when rent does not fully cover the payment, typically down to a 0.75 ratio, at 65 to 70 percent loan-to-value and a rate a half to one and a half points higher than a fully covered property. Before taking that deal, a larger down payment, an interest-only option, or better rent documentation will often push the ratio back above 1.00.
What a sub-1.00 ratio means
A DSCR of 0.90 means the rent covers 90 percent of the full payment and you cover the rest each month. Lenders will finance that because the property still has equity and you have reserves, but they price the shortfall as risk.
| DSCR | Typical treatment |
|---|---|
| 0.90 to 0.99 | Many lenders, leverage 70 to 75 percent, modest rate bump |
| 0.75 to 0.89 | Fewer lenders, leverage 65 to 70 percent, rate up 1 to 1.5 points |
| Under 0.75 | Rare; usually a bridge loan then a DSCR refinance after rents rise |
Ranges vary by lender. Most also require higher reserves, often six months, when the ratio is below 1.00.
Four ways to lift the ratio
1. A larger down payment. Moving from 80 to 70 percent loan-to-value cuts the payment about 12 percent. A ratio of 0.92 at 80 percent becomes roughly 1.05 at 70 percent.
2. Interest-only. A ten-year interest-only period lowers the payment used in the calculation, often enough to add 0.15 to 0.25 to the ratio.
3. Better rent documentation. The appraiser sets the rent. Give the appraiser comparable leases and, for a leased property, the actual lease at or above market. A $200 higher rent figure on a $2,600 payment moves the ratio about 0.08.
4. A longer prepayment penalty or a rate buydown. A lower rate is a lower payment. One point of rate on a $400,000 loan is about $250 a month.
When the ratio stays low
If none of those bring it above 1.00, the question becomes whether the property is worth carrying. A high-appreciation market or a rent-controlled building with upside can justify it. A property that will never cover its own payment usually should not be financed on a 30-year loan; a value-add bridge loan and a plan to raise rents is the better structure.
The refinance path
Buy with the lower-ratio DSCR loan or a bridge loan, raise rents through renovation or turnover, and refinance into a standard DSCR loan once the ratio is 1.20 or better. Most lenders will use the new rent after a lease is in place and the property has seasoned three to six months.
How CommFi handles it
Our lending desk runs the ratio under every structure, including interest-only and lower leverage, and funds direct when it fits. When a lower-ratio lender is the right fit, the desk searches a database of 7,000+ lenders and the ones that lend under 1.00 compete for the file. Zero upfront fees.
Related reading
Related questions
- What is the lowest DSCR a lender will accept?
- Around 0.75 with a small group of lenders, at 65 to 70 percent leverage and a higher rate. Below that, a bridge loan is the usual route.
- Does a bigger down payment fix a low DSCR?
- Often. Dropping from 80 to 70 percent loan-to-value cuts the payment about 12 percent, which can move a 0.92 ratio above 1.00.
- Can interest-only raise my DSCR?
- Yes. The interest-only payment is lower, so the ratio rises, often by 0.15 to 0.25.
- Will a low DSCR raise my rate?
- Yes. Expect a half to one and a half points above a property with a 1.25 ratio.
- Should I buy a property that does not cover its payment?
- Only with a clear plan to raise rents or a strong reason to hold, such as a redevelopment. Otherwise structure it as a bridge loan with a refinance once rents support the debt.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.