DSCR Loans Texas: A Complete Guide [2023]

Buy your investment property in Texas with DSCR loans. Read on to explore how this financing option can help you achieve your real estate investment goals in the Lone Star State.

DSCR Loans Texas

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In the world of real estate investment, innovative financing solutions are essential. Explore the intricacies of acquiring DSCR loans Texas and equip yourself with the Texas real estate market with this comprehensive guide for investors.

DSCR Loans - positive cash flow against debt.

DSCR Loans Texas Requirements 

1. Down Payment (20-25%) 

  • To secure your investment property through DSCR loans in Texas, you must provide a minimum down payment of 20-25% of the property’s purchase price.   
  • While this percentage might vary based on the lender and specific circumstances, it’s essential to have a portion of the property’s value ready as part of your investment strategy. 

2. Credit Score (620) 

  • A good credit score of 620 or more is essential for qualifying for a DSCR loan. 
  • Lenders assess the investor’s creditworthiness to ensure a history of responsible financial behavior.  
  • A higher credit score can positively influence loan terms and eligibility. 

3. Adequate Appraisal Fee 

  • As a prospective buyer, you must have enough cash to pay the appraisal fees. However, If you choose a direct approach, you can save up to $200 on the appraisal fees. 

Note: What is Direct Approach?  

When an appraiser compiles this form as an appendix to the appraisal report for a single-family investment property, it is called the Direst Approach. This not only reduces your upfront costs but also expedites the process of obtaining an accurate valuation. 

4. Minimum DSCR of 1 

  • Lenders in Texas generally require a minimum DSCR of 1 to ensure the property generates enough revenue to manage the loan payments effectively.  
  • Even if your DSCR is less than 1, some lenders may finance your investment with higher interest rates and down payment. 

By thoroughly comprehending and addressing these DSCR loan requirements in Texas, you enhance your ability to secure financing for your real estate investment, setting the stage for a successful venture in the thriving Texas property market.

DSCR < 1Cannot Cover Debt Payment
DSCR = 1Cover Debt Payment
DSCR > 1Generates Revenue

What is the Formula for DSCR with Example? 

  1. Calculate Net Operating Income (NOI): NOI is the property’s total income minus operating expenses. It includes rental income and deducts property-related costs like management fees, utilities, taxes, insurance, and maintenance expenses. 
  2. Determine Total Debt Service: Total Debt Service is the sum of all debt payments, including principal and interest payments on loans. 
DSCR Loan Texas Formula

DSCR Calculator [2023]: Calculate Your DSCR 

Example: Suppose a property generates a Net Operating Income (NOI) of $80,000 per year, and its Total Debt Service (debt payments) amounts to $60,000 annually. 

  • DSCR = NOI / Total Debt Service DSCR = $80,000 / $60,000 DSCR = 1.33 
  • In this scenario, the property’s DSCR is 1.33, indicating that its income comfortably covers its debt payments, leaving room for surplus income. 

DSCR Loans Texas Application Process: Step-by-Step 

Embarking on the journey to secure DSCR loans in Texas involves a series of well-defined steps. Let’s break down the process into a comprehensive guide to help you navigate with confidence. 

Step 1: Research and Selection  

Begin by researching reputable lenders specializing in DSCR loans in Texas. Explore their terms, interest rates, and track record. This initial phase is vital as it sets the tone for a successful loan application.  

HomeAbroad specializes in DSCR loans, offering the most competitive terms and swift approvals. Get your rate quote today! 

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Step 2: Paperwork 

Gather the necessary documentation, including property details and financial records related to the property. While DSCR loans offer more flexibility than traditional loans, proper documentation remains crucial to ensure a smooth application process. 

Step 3: Application Submission  

Submit your loan application through the lender’s designated platform. Online applications are often preferred for their convenience and efficiency, enabling you to initiate the process from the comfort of your workspace. 

Our blog lets you learn in-depth about the DSCR loan program down payment! 

Step 4: Underwriting and Evaluation  

This phase involves a thorough evaluation by the lender. They will assess factors such as the property’s potential rental income, operating expenses, and debt service coverage ratio. The outcome of this assessment will influence your loan offer. 

Step 5: Loan Offer and Acceptance  

Upon successful evaluation, you’ll receive a loan offer detailing the terms, interest rates, and associated fees. Carefully review these terms and ensure they align with your investment goals before accepting the offer. 

Step 6: Closing and Disbursement  

The closing phase involves signing the necessary paperwork and legal documents. This formalizes the agreement, and once completed, the funds are disbursed to facilitate your real estate investment. 

As you traverse the path to securing DSCR loans in Texas, understanding the DSCR loan’s interest rate can significantly impact your investment success.  

DSCR Loans Texas Interest Rates

Navigating Debt Service Coverage Ratio (DSCR) loans requires understanding interest rates, which is pivotal in shaping your investment. DSCR rates generally run 1-2% higher than conventional mortgages. Remember, these rates can vary by lender, emphasizing the importance of obtaining quotes from multiple sources.

Texas Real Estate Market Overview 

Source: Texas Real Estate Research Center 

  • The median home prices in Texas displayed resilience as they rose by 0.3 percent, reaching a figure of $337,900.  
  • Among Texan cities, Austin registered the most significant monthly increase, with a notable gain of 4.2 percent, marking its highest price level over the past nine months. 
  • The decline in homebuyer demand has resulted in a decrease in total home sales in Texas. In June, these sales dropped to a level below 28,000 transactions. 
Home Sales Volume Texas: DSCR Loan Texas

Source: Texas Real Estate Research Center 

Is Now a Good Time to Buy Property in Texas, Given That Rates Are at an All-Time High? 

Whether it’s a good time to buy property in Texas right now depends on various factors, including your financial situation and long-term plans. 

If you’re considering a long-term investment, buying property in Texas could still yield good returns, even with high rates. This is due to the state’s strong property appreciation and potential for rental income. While rates are a factor, investors also have the option to refinance when rates go down. 

Therefore, one shouldn’t miss the opportunity to start building equity today!

Debt Service Coverage Ratio (DSCR) Calculator

Calculate DSCR Now!

Know the viability of your investment property with our DSCR calculator. Ensure you have the financial capacity to meet your debt obligations.

DSCR for Commercial Real Estate and Other Investment Types 

The DSCR calculator helps evaluate potential investments or loans in various sectors, including investment property and commercial real estate. 

  • For example, the calculator can compare other commercial developments based on net operating income (NOI) and debt servicing needs. 
  • Lenders can use this information to determine the best investment for their portfolio and minimize risk. 

It is also a valuable tool for evaluating other types of investments, such as stocks and bonds. You can also learn more about DSCR Commercial real estate through this guide. 

Also, wish to see how DSCR loans work in a different city? Read our guide to DSCR loans in Florida!


Securing DSCR loans in Texas opens doors to a realm of possibilities in the ever-evolving real estate market. By familiarizing yourself with the requirements, qualifications, and step-by-step process outlined in this guide, you’re better equipped to embark on your investment journey confidently. Remember, a DSCR loan is a strategic tool to leverage the potential of your investment property and make a mark in the thriving Texas real estate landscape. 

Frequently Asked Questions

1. Is it difficult to get a DSCR loan in Texas?

It’s easy to get a DSCR loan in Texas. In addition, the requirements for these loans are usually lower than traditional commercial real estate loans, making them easier to qualify for.

2. Are there any fees associated with DSCR loans in Texas?

Yes, some fees are associated with Texas DSCR loans. These include origination fees, appraisal fees, and closing costs. Be sure to factor these into your budget when applying for a loan.

3. Are there any restrictions on using the funds from a DSCR loan?

Most lenders will require you to use the funds from a DSCR loan only for specific purposes, such as refinancing, purchasing a new property, or making improvements. 
We suggest checking with a lender to determine what you can and cannot use the funds for. HomeAbroad has a vast network of lenders to help you do the same.  

4. Are DSCR loans only available in Texas?

No, DSCR loans are available in other states as well. However, they are most popular in the state of Texas due to the favorable terms and conditions offered by lenders there. You can also check out DSCR loans in other cities.

5. How much do you need to put down for a DSCR loan?

The money you need for a DSCR loan will depend on the lender and mortgage terms. Generally, down payments start from 20%-25% of the total loan amount. Be sure to ask your lender about their specific requirements before applying. 

6. What is the difference between a DSCR loan and a traditional loan?

The qualification requirements are the main difference between a DSCR and a traditional loan. DSCR loans require an income-generating property to qualify for the mortgage. However, traditional mortgages require borrowers to meet certain personal income criteria to get the loan.
However, traditional mortgages require borrowers to meet specific personal income criteria to get the loan.  

7. What documents will I need to apply for a DSCR loan?

Purchase and sale agreement for the property
Personal identification documents
Social Security number
Property appraisal report
Rent roll or lease agreements (if the property is already generating rental income)
1007 Rent Schedule (If buying a new property)

8. How many DSCR loans can you have?

The number of DSCR loans you can have depends on the lender’s requirements and your budget. Generally, lenders will allow a borrower to have up to four DSCR loans simultaneously.
Considering these limitations when investing in multiple properties with a DSCR loan is essential.

9. Who gives DSCR loans in Texas?

A variety of lenders offer DSCR loans in Texas, such as banks, credit unions, and private lenders. Each lender will have different requirements for loan approval and terms. HomeAbroad can provide you with access to the best investor-friendly mortgage lender in the state.

10. Can you refinance a DSCR loan?

Yes, you can refinance a DSCR loan. Refinancing a DSCR loan is an excellent option to lower your interest rate or change the loan terms. 
However, it is best to consult with a lender before refinancing, as the process may have associated costs. 

11. Do DSCR loans show on a credit report?

Yes, DSCR loans will show up on your credit report. It is essential to know this before taking out a loan and ensure that you make all payments on time.

12. Should you buy a property in Texas or not due to high interest rates?

Yes, considering the 30-year fixed rate with an interest rate of 7.62% and an APR of 7.64%, buying a property in Texas is advisable. Despite the relatively high-interest rates, a fixed-rate mortgage provides stability over the long term. This means you’ll have a consistent monthly payment, which can help you plan your finances effectively.

About the author:
Amresh is the Founder & CEO of HomeAbroad. With over 14 years of mortgage industry experience, he specializes in foreign national mortgages and Non-QM mortgages. He is also a licensed mortgage originator (NMLS # 2549148).

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