Feb 25 2026 15:58
Quick Summary:
DSCR (Debt Service Coverage Ratio) loans allow real estate investors in West Palm Beach to qualify for financing based on a property’s rental income—not personal tax returns or W‑2 income. These programs are ideal for investors with strong cash‑flowing properties, complex tax returns, or multiple rental units. DSCR loans focus on whether the rent can cover the mortgage payment, making them a popular option across Palm Beach County for long‑term rentals, Airbnb/short‑term rentals, and portfolio growth. CTC Mortgage helps investors evaluate DSCR requirements, compare lender guidelines, and choose the right structure for their investment strategy.
What Is a DSCR Loan?
A DSCR loan is a type of non‑QM (non‑traditional) mortgage used for investment properties. Instead of verifying your personal income, lenders focus on the property’s ability to generate enough rent to cover the monthly mortgage payment. This makes DSCR loans especially attractive for West Palm Beach investors whose taxable income may not reflect their true financial strength.
How DSCR Is Calculated
The formula is simple:
DSCR = Gross Monthly Rent ÷ Total Monthly Housing Payment
The housing payment includes principal, interest, taxes, insurance, and HOA dues (if applicable). Most Palm Beach County lenders look for a DSCR between 1.0 and 1.25, meaning the rental income covers 100%–125% of the payment. Some DSCR programs allow ratios below 1.0 for strong borrowers or larger down payments.
Who DSCR Loans Are Best For
Investors who benefit most include:
- Buy-and-hold investors purchasing rental property
- Short‑term rental investors (Airbnb/VRBO)
- Investors with significant write‑offs that reduce taxable income
- LLC or partnership buyers wanting business‑entity ownership
- Portfolio investors scaling quickly
What Income Counts?
DSCR lenders evaluate the income potential of the property itself. They may use:
- Current lease agreement(for long‑term rentals)
- Market rent estimate from the appraisal (1007 rental schedule)
- Short‑term rental history or revenue projections (program‑specific)
This flexibility is valuable in West Palm Beach, where rental demand is strong and short‑term rental income can outperform traditional leases.
Typical Documents Needed
DSCR loans require fewer documents than conventional or full‑doc investor loans. Most lenders ask for:
- Lease agreement (if applicable)
- Appraisal + rental analysis (Form 1007)
- Homeowners insurance quote
- LLC documents (if closing in an entity)
- Driver’s license or passport
- Proof of assets for down payment and reserves
There is no personal income documentation, no tax returns, and typically no employment verification.
Common DSCR Investor Questions
1. Can I refinance with a DSCR loan?
Yes. Many Palm Beach County investors use DSCR loans for:
- Rate‑and‑term refinance
- Cash‑out refinance to fund future purchases
- Refinancing out of hard money loans
CTC Mortgage helps West Palm Beach investors compare refinance options and estimate cash‑out availability.
2. Do DSCR loans have prepayment penalties?
Often, yes. Many DSCR lenders include 1–5 year prepayment penalties, especially for investment properties. These can sometimes be removed for an added cost. Understanding the penalty structure is critical for investors planning to sell or refinance in the short term.
3. What DSCR ratio do lenders look for?
Most lenders prefer 1.0–1.25+, but some allow ratios below 1.0 with compensating factors such as strong assets, higher credit scores, or larger down payments. CTC Mortgage sources programs across multiple DSCR lenders to match West Palm Beach investors with the right fit.
Pros and Cons of DSCR Loans
Pros
- No tax returns or W‑2s required
- Flexible underwriting focused on property income
- Ideal for LLC ownership and portfolio growth
- Fast closings—often faster than conventional loans
Cons
- Slightly higher rates than conventional investment loans
- Prepayment penalties may apply
- Requires strong rental performance to qualify
How to Strengthen Your DSCR Application
To maximize approval odds and pricing, investors should focus on:
- Strong credit scores (typically 660+)
- A 20%–25% down payment
- Documenting rent clearly and accurately
- Choosing properties with solid long‑term rental demand
Get Local Guidance on DSCR Loans
Explore DSCR loan options and investor programs below:
Start Your DSCR Loan Pre‑Approval with CTC Mortgage
If you're an investor in West Palm Beach or anywhere in Palm Beach County, CTC Mortgage can help you evaluate DSCR programs, estimate rental performance, and secure financing without tax‑return documentation. Contact our team today to get pre‑approved and move forward with your next investment property.