How to Qualify for a DSCR Loan in Texas (2026 Guide)
- 4 days ago
- 2 min read
Texas continues to be one of the strongest rental markets in the country.
From Dallas and Houston to Austin and San Antonio, investors are using DSCR loans to scale portfolios without traditional income documentation.
But how exactly do you qualify for a DSCR loan in Texas?
Let’s break it down.
What Is a DSCR Loan?
A DSCR (Debt Service Coverage Ratio) loan allows real estate investors to qualify based on property cash flow — not personal W2 income.
Instead of verifying tax returns, lenders evaluate:
Projected rental income
Monthly debt obligation
Property type
Credit profile
Down payment
If the property covers the mortgage payment, you’re in business.
Minimum Credit Score Requirements in Texas
Most DSCR lenders in Texas require:
Minimum 640–680 FICO
Better pricing at 700+
Stronger leverage above 720
Best terms above 760
Lower credit scores may still qualify, but rates and down payments increase.
Rental Income Qualification
In Texas, DSCR lenders typically use:
Market rent from appraisal (Form 1007)
Existing lease agreement (if occupied)
If you’re buying a vacant property, projected rent is often acceptable.
The key metric:
DSCR = Monthly Rent ÷ Monthly Mortgage Payment
Many lenders look for:
1.00–1.25 DSCR minimum
Some allow below 1.0 with higher down payment and higher interest rate
Down Payment Requirements
Typical Texas DSCR loan terms:
20–25% down payment
75–80% LTV
Higher leverage for stronger borrowers
Condos and rural properties may require additional equity.
Eligible Property Types in Texas
Most lenders allow:
Single-family rentals
2–4 unit properties
Townhomes
Non-owner occupied condos
Some lenders also allow:
Short-term rentals
5–10 unit properties (portfolio DSCR)
Is Texas a Good Market for DSCR Loans?
Yes — and here’s why:
No state income tax
Strong job growth
Population migration
Landlord-friendly regulations (in most cities)
Investors continue expanding portfolios in:
Dallas-Fort Worth
Houston
Austin
San Antonio
Do You Need a Lease at Closing?
Often, no.
Many DSCR programs allow closing without an executed lease if the appraisal supports market rent.
However:
Some lenders prefer a signed lease
Some programs require a lease for short-term rental loans
Reserve requirements may vary
Always confirm program structure before assuming projected rent alone is sufficient.
Common Mistakes Investors Make
Overestimating rental income
Using Zillow rent estimates instead of appraisal-level comps
Ignoring vacancy assumptions
Not factoring insurance and taxes accurately
Projected rent is powerful — but it must be realistic.
Bottom Line
If you’re investing in Texas and want to structure a DSCR loan correctly the first time, it helps to work with a lender that understands:
Appraisal rent schedules
Investor cash flow modeling
State-specific underwriting nuances
Explore our full Texas DSCR loan guidelines here:
Ready to See If Your Property Qualifies?
If you're evaluating a rental acquisition and want clarity on projected rent, DSCR ratio, and leverage options, start with a structured review.
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