Does Grafton Funding offer DSCR loans for rental properties?

Yes — DSCR (Debt Service Coverage Ratio) loans are our most popular product. We lend on single-family rentals, 2–4 unit properties, short-term rentals (like Airbnb and VRBO), and small multifamily up to 10 units. We qualify the property on its rental income rather than your personal income or tax returns. Minimum DSCR is typically 1.0x, and we lend in TX, FL, GA, NC, SC, and other states.

Does Grafton Funding do fix and flip loans or bridge loans?

Yes. We provide fix and flip loans and bridge loans for non-owner occupied investment properties. Our programs cover the purchase price plus rehab costs, with fast closings. Loan terms are short-term (typically 12–18 months) and are designed around the investor's exit strategy — either sale or refinance.

Can I get a DSCR loan for an Airbnb or short-term rental property?

Yes — we specialize in short-term rental (STR) financing. We use either the property's actual Airbnb or VRBO income history or a market-rate STR income estimate to qualify the loan. You don't need W-2s or tax returns.

Does Grafton Funding offer new construction loans for investment properties?

Yes. We offer new construction loans for non-owner occupied residential investment properties, including spec builds, ground-up construction, and lot + build projects. These are short-term loans that fund in draws as construction progresses.

Does Grafton Funding lend in North Carolina?

Yes — we actively lend in North Carolina, including the Charlotte metro, the Triangle (Raleigh/Durham/Chapel Hill), Wilmington, and Asheville. We offer DSCR rental loans, fix and flip loans, and new construction financing for NC investment properties. Local NC line: (910) 218-1286.

Can I qualify for a loan without showing tax returns or personal income?

Yes — our DSCR loans are underwritten based on the property's rental income, not your personal income or tax returns. This makes them ideal for self-employed investors and business owners. We do require a credit check and down payment, but there's no traditional income verification.

What credit score do I need to get a loan from Grafton Funding?

For most DSCR rental loan programs, we generally look for a minimum credit score in the 660–680 range, though this can vary by program and loan-to-value. Fix and flip loans may have different requirements depending on experience and deal strength.

How much do I need to put down for a DSCR loan?

For DSCR rental loans, we typically lend up to 75–80% loan-to-value (LTV), meaning you'd need 20–25% as a down payment. The exact LTV depends on the property type, DSCR ratio, and your credit profile. We lend exclusively on non-owner occupied investment real estate.

How quickly can Grafton Funding close a loan?

Many of our transactions close in 2–4 weeks depending on the loan type, property, and how quickly documentation is provided. We prioritize responsive communication and efficient underwriting for investors who need to move fast on deals.

Does Grafton Funding work with first-time real estate investors?

Yes — we work with both new and experienced investors. For DSCR rental loans, first-time investors are welcome as long as the property cash flows and the borrower meets our credit and down payment requirements. For fix and flip loans, some experience is preferred but not always required.

What Is the Minimum DSCR Ratio Required in 2026?

Q: Can I get a DSCR loan with a ratio below 1.0?

Some specialty lenders offer no-ratio DSCR loans that bypass the income calculation entirely, allowing a DSCR of 0 or N/A. These are typically used for vacant properties or situations where the rental income does not yet cover costs. They require larger down payments — usually 30% to 40% — higher credit scores, and strong financial reserves. They are a niche product, not the norm.

Mar 5
4 min read

If you’re applying for a DSCR loan, one number matters more than anything else:

Your DSCR ratio.

But what is the minimum required to qualify in 2026?

The answer: typically between 1.0 and 1.25, depending on the program.

Let’s break it down.

Quick Answer: Most lenders require a minimum DSCR of 1.0 to 1.25. A ratio of 1.0 means the property's rental income exactly covers the mortgage payment. A ratio of 1.25 means income is 25% higher than the payment. Many lenders prefer 1.25 for conventional programs, though some no-ratio DSCR loans waive the requirement entirely.

What Is DSCR?

DSCR stands for Debt Service Coverage Ratio.

It measures whether the property generates enough income to cover its mortgage payment.

The formula:

DSCR = Gross Rental Income ÷ Total Debt Payment

If a property generates $2,000/month in rent and the mortgage payment plus taxes, insurance, and HOA fees (if applicable) is $1,600:

DSCR = 1.25

That means the property earns 25% more than the required debt payment.

If you’re new to DSCR financing, review our full DSCR Rental Loan overview.

What Is the Minimum DSCR to Qualify?

Most programs require:

• 1.0 DSCR minimum

• 1.10–1.25 preferred for stronger terms

Here’s what that means:

1.0 DSCR

Property income exactly covers debt payment.

Some lenders allow this with:

Higher down payment
Strong credit score
Higher interest rates

1.25 DSCR

Property generates 25% more income than debt.

This often qualifies for:

Better pricing
Maximum leverage
Faster approvals

Can You Qualify Below 1.0 DSCR?

Some programs allow:

• 0.75–0.99 DSCR

• With 25–30% down

• Higher reserves

• Strong credit

But these are more specialized scenarios.

If you're reviewing leverage options, see our DSCR down payment guide.

How Appraisals Affect DSCR

DSCR is usually calculated using:

• Market rent appraisal (Form 1007)

• Existing lease agreement

• AirDNA (for short-term rentals)

If you're financing an Airbnb, read how DSCR loans work for short-term rentals.

Credit Score & DSCR Work Together

A 1.0 DSCR with:

• 740 credit

• 20% down

May still qualify comfortably.

But a 1.0 DSCR with:

• 640 credit

• 30% down

May face tighter approval conditions.

If you're unsure about credit requirements, see our DSCR credit score guide.

Want to Calculate Your DSCR?

Before submitting an offer, review how your projected rent compares to expected debt payments.

Review DSCR Loan Guidelines

State Markets Can Influence Structure

In high-demand markets like Texas, strong rental demand may support better DSCR outcomes.

What Happens If DSCR Is Too Low?

If DSCR falls short, options include:

• Increase down payment

• Negotiate purchase price

• Improve rent projections

• Choose longer amortization

• Consider interest-only structure

Small adjustments can change qualification.

Bottom Line

Minimum DSCR requirement in 2026:

• 1.0 is often the floor

• 1.25 is preferred

• Lower DSCR may require stronger compensating factors

Understanding your ratio early prevents surprises during underwriting.

Frequently Asked Questions

What is the minimum DSCR ratio most lenders require?

The standard minimum is 1.25 for most conventional DSCR programs, meaning the property generates 25% more income than the total monthly debt payment. Some lenders, including Grafton Funding, will go as low as 1.0, which means income exactly covers the payment — but expect stricter requirements on credit score, down payment, and reserves at that threshold.

How is DSCR calculated for a rental property?

DSCR is calculated by dividing the gross monthly rental income by the total monthly debt service (principal, interest, taxes, insurance, and HOA if applicable). For example, if a property generates $2,000 per month in rent and the full monthly payment is $1,600, the DSCR is 1.25. Lenders typically use the market rent appraisal (Form 1007) or an existing lease to determine the income figure.

Can I get a DSCR loan with a ratio below 1.0?

Some specialty lenders, including Grafton Funding, offer no-ratio DSCR loans that bypass the income calculation entirely, allowing a DSCR of 0 or N/A. These are typically used for vacant properties or situations where the rental income does not yet cover costs. They require larger down payments — usually 30% to 40% — higher credit scores, and strong financial reserves. They are a niche product, not the norm.

Does a higher DSCR mean better loan terms?

Generally yes — a higher DSCR signals stronger cash flow and lower default risk to lenders. A property with a 1.4 or 1.5 DSCR may qualify for a lower interest rate, higher loan amount, or reduced reserve requirement compared to one at 1.0 or 1.1. Lenders use tiered pricing models, and a strong DSCR can meaningfully reduce your borrowing cost over the life of the loan.

How can I improve my DSCR to qualify for a better loan?

There are several levers you can pull. Increasing the down payment lowers the loan amount and reduces the monthly payment, which raises the ratio. Negotiating a lower purchase price achieves the same effect. Choosing an interest-only loan structure also lowers the monthly payment. On the income side, selecting a property with higher market rents or locking in a strong lease before closing can boost the numerator. Running these numbers before submitting an application prevents surprises at underwriting.

Ready to Review Your Property’s Cash Flow?

If you're evaluating a rental investment, start with a quick DSCR qualification review.

Start Your Pre-Qualification