Maximize Cash Flow & Minimize Loan Costs with PAX Mortgage's DSCR Strategy!
Debt service coverage ratio = gross rent divided by pitia (principal interest taxes insurance + association) | interest only = gross rent / itia
No Income Verification – Qualify Based on Rental Income - Non Owner Occupied
Investing in real estate should be simple. Our Debt Service Coverage Ratio (DSCR) loans make it easy for investors to finance 1-4 unit rental properties without the hassle of income verification, tax returns, or W-2s. Whether you’re purchasing, refinancing, or cashing out equity, we offer fast approvals, very flexible terms, and aggressive rates-pricing.
PAX Mortgage DSCR highlights:
✅ No personal income verification – Qualify based on property cash flow
✅ Loan amounts up to 3,500,000
✅ Interest-only options available – Maximize cash flow
✅ Close in as little as 2 weeks – Quick & hassle-free process
✅ Lender paid and Borrower paid options available-reduce closing costs, maximize cash out
✅ Close in your name(s) or an entity
✅ Vacant properties
✅ Short term Rental (STR) loans up to 3,500,000
✅ Qualify with AirDNA Market Score+appraisal
✅ Non warrantable Condos and Condotels
Getting the best DSCR loan product and pricing!
DSCR loan pricing is determined by several key factors, including your FICO score and the property's DSCR ratio, shopping lender competitiveness, LTV, and your discount points and prepayment penalty selections.
Lender paid just means the compensation is built into the rate while borrower paid is an additional origination charge added to the closing costs. The rate will also likely look lower with borrower paid, but your closing costs will be higher. A lot of DSCR lenders only offer borrower paid but it is important to know the difference when comparing loans.
No, but they are common. Pre-payment penalties can play a significant role in DSCR loan pricing by impacting both the interest rate and overall loan costs.
Can I get a DSCR rental loan on a 100% vacant property?
Yes, but not all lenders allow it. Some may only offer loans for purchases or partially vacant properties, while others offer options for refinance or cash-out refinance on vacant rentals. The property needs to be in a rentable condition and the lender will request a market rental survey addendum in the appraisal to determine the DSCR. And for short term rentals (STR) with no rental history they can look at third party research such as AirDNA to determine the property's income potential.
Yes, the majority of DSCR lenders will require you to close in an entity only, but a handful of lenders will allow you to close in your name(s) or an irrevocable trust as well.
Most lenders want to see a FICO score of at least 620 or higher, some 680 and higher. A Rapid Rescore Simulator is software used by mortgage lenders to quickly update your credit report and improve your FICO score within days, rather than waiting weeks or months for traditional updates. It analyzes your current credit profile and provides actionable steps to increase your score "during" the mortgage process so that you can achieve better pricing.
The BRRRR strategy—Buy, Rehab, Rent, Refinance, Repeat—is a powerful method for real estate investors to build wealth and scale their rental portfolios with minimal upfront capital. By recycling your investment funds, you can maximize returns and grow passive income through rental properties. Typically an investor will refinance a fix and flip loan into a DSCR loan as part of this strategy.
Is Portfolio Lending a good strategy for real estate investors?
Maybe. If you have a lot of properties and you can refinance all of them at a lower rate with one loan - this would certainly be beneficial. But in a severe economic downturn portfolio loans can pose a risk. Since all properties are bundled into one loan it might become an "all or none" outcome. Whereas, with individual DSCR loans for each rental property, you could pick and choose which properties to refinance, sell, or hold based on equity, market conditions and investment goals.
When your loan has a prepayment penalty, it will only apply if you pay off your DSCR loan early, whether through selling or refinancing. These penalties vary by lender but common structures include:
• 3-2-1 Step-Down: A 3% penalty in year one, 2% in year two, and 1% in year three—after that, no penalty.
• 5-4-3-2-1 Step-Down: Starts at 5% in year one and decreases annually until year five.
• 6 Months of Interest: A charge equal to six months’ interest if the loan is paid off early.
What are the pros and cons of DSCR loans?
Pros:
• No Personal Income Verification: Approval is based on property cash flow, so no W-2s or tax returns are required.
• Faster Approval & Less Paperwork: The simplified process allows investors to close deals quickly in competitive markets.
• No Limit on Property Ownership: Unlike traditional mortgages that typically cap ownership at 6-10 properties, DSCR loans allow unlimited properties.
Cons:
• Marginally Higher Interest Rates: DSCR loan rates are typically higher than traditional mortgages. However, recent adjustments by Fannie Mae and Freddie Mac for investment properties have narrowed the gap.
• Underwriting and Administration fees can vary from lender to lender with some lenders requiring mandatory points to underwrite the loan.
Can choosing an "interest-only" mortgage product increase your DSCR?
Yes, with an interest-only loan, your monthly payment is lower because you’re only paying interest, not principal. Since the denominator (debt payment) decreases, the DSCR increases, making it easier to qualify for the loan.
How long does it take to close a DSCR rental loan?
It varies by lender with lender efficiency and the appraisal process being key factors in how long it takes to close. But generally, with some lenders you can close as soon as 10 days and with other lenders it could take approximately 30 days.