# DSCR Loans in Tennessee: Ratios, Down Payment and Credit Canonical URL: https://valor.mortgage/dscr-loans/ Page title: DSCR Loans in Tennessee for Investors | Valor Mortgage How lenders calculate the debt service coverage ratio, the minimums they use, and what you need down to qualify a rental on its rent. [Apply Now](https://app.valor.mortgage/) By [Christopher Armantrout](https://valor.mortgage/about-us/), Licensed Mortgage Loan Originator · NMLS [#1210804](https://www.nmlsconsumeraccess.org/EntityDetails.aspx/INDIVIDUAL/1210804) Last updated October 27, 2026 Checked against published 2026 non-QM investor guidelines · October 2026 Quick answer A DSCR loan qualifies a rental property on its rent instead of your personal income. The lender divides the monthly rent by the property’s principal, interest, taxes, insurance and HOA dues (PITIA). Most programs want a ratio of 1.00 or higher, with 20%–25% down and a credit score of 620 to 700. Some lenders go below 1.00, or use no ratio at all, in exchange for more down and a higher score. Program ranges on this page were compiled in October 2026 from published 2026 guidelines of national non-QM investors (listed in the sources table). DSCR programs are set by each lender, not a government agency. Program terms and eligibility are subject to lender guidelines and may change. At a glance: DSCR loans in Tennessee - **Formula:** gross monthly rent ÷ PITIA (or interest-only payment) - **Minimum ratio:** 1.00 is standard; 0.75 or no ratio at some lenders - **Down payment:** usually 20%–25%; 15% at a few lenders with 720+ credit - **Credit:** 620 to 700 minimum, depending on lender and loan-to-value - **Reserves:** commonly 3 to 6 months of PITIA, more on large loans - **Use:** investment property only, 1–4 units; LLC vesting allowed ## How is the DSCR calculated? DSCR (debt service coverage ratio) = gross monthly rent ÷ the monthly PITIA. A ratio of 1.00 means the rent exactly covers the payment; 1.25 means the rent is 25% more than the payment; 0.80 means it covers 80%. It uses gross rent, not net operating income. - **Which rent counts:** usually the lower of the signed lease and the appraiser’s market rent (Fannie Mae Form 1007 for a single-family home, 1025 for 2–4 units). Some lenders accept a higher lease, capped at 115%–125% of market rent, with two months of proof it’s being paid. On a purchase with no lease, market rent is used. - **Short-term rentals:** allowed by many lenders, using 12 months of Airbnb or VRBO history on a refinance, or an AirDNA projection on a purchase. Some reduce the income by 20% for management and limit short-term rentals to experienced investors. | DSCR | What it means | Typical treatment | |---|---|---| | 1.25 and up | Rent is at least 125% of the payment | Best program tiers at some lenders | | 1.00 to 1.24 | Rent covers the payment | Standard minimum at most lenders; some require 1.20 above 80% LTV or with a 660 score | | 0.75 to 0.99 | Rent covers most of the payment | Allowed by some lenders, usually with 680–720+ credit and 25%–40% down | | Under 0.75 / no ratio | Rent isn’t used to qualify | A few “no ratio” programs, typically capped near 75% LTV at the top credit tiers | Sources: MAXEX DSCR Program Guide v13 (May 2026); LoanStream DSCR Matrix (Oct 8, 2026); A&D Mortgage Product Matrix (Aug 31, 2026). Ranges vary by lender. Program terms and eligibility are subject to lender guidelines and may change. ## How much down payment and credit do you need for a DSCR loan? | Requirement | Common range in 2026 guidelines | |---|---| | Minimum credit score | 620 to 700; the best loan-to-value tiers usually need 700–720+ | | Purchase or rate-and-term refinance | 75%–80% LTV (20%–25% down); up to 85% at a few lenders with 720+ credit | | Cash-out refinance | 70%–75% LTV, sometimes 80% at top credit | | Loan amount | From about $100,000 to $2.5–$3.5 million | | Bankruptcy, foreclosure or short sale | Commonly 36 to 48 months since the event | Sources: the lender guidelines listed under “Where these figures come from”. A lower score or a ratio under 1.00 usually means a lower maximum LTV. Program terms and eligibility are subject to lender guidelines and may change. ## How many months of reserves does a DSCR loan need? Usually 3 to 6 months of the property’s PITIA, held in your own accounts after closing. Larger loans need more: one 2026 guide asks for 3 months up to $1 million, 6 months up to $2 million and 9 months up to $3 million. Several lenders let cash-out proceeds count toward reserves. Program terms are subject to lender guidelines and may change. ## Who qualifies for a DSCR loan? - **Investment property only.** You sign a business-purpose and occupancy affidavit, and you can’t live in the home. Because the loan is for business purposes, the federal ability-to-repay rule for consumer mortgages doesn’t apply. - **Property:** 1–4 unit homes and warrantable condos; non-warrantable condos at some lenders with less leverage. 5–8 unit and mixed-use buildings are separate programs with higher minimums. - **Vesting:** in your name or an LLC; lenders require the owners to personally guarantee the loan. - **Experience:** some lenders require 12 months of owning and managing rental property; others allow first-time investors, usually at 80% LTV or less. Many don’t allow first-time homebuyers. ## Do DSCR loans have prepayment penalties in Tennessee? Often, yes. Tennessee law generally leaves prepayment terms to the loan contract ([Tenn. Code Ann. § 47-14-108](https://codes.findlaw.com/tn/title-47-commercial-instruments-and-transactions/tn-code-sect-47-14-108/)), and DSCR loans are business-purpose loans. Common structures are 5 years stepping down (5%, 4%, 3%, 2%, 1%), 3 years (3%, 2%, 1%), or a flat percentage for one to five years. Choosing a shorter penalty, or none, usually changes the pricing. Some lenders require a penalty above 80% LTV. Owner-occupied loans are different: federal rules sharply limit prepayment penalties on consumer mortgages. ## What does a DSCR loan look like on a $300,000 rental in Robertson County? | Item | 80% LTV | 75% LTV | |---|---|---| | Purchase price | $300,000 | $300,000 | | Down payment | $60,000 | $75,000 | | Loan amount | $240,000 | $225,000 | | Typical minimum credit | 700–720 | 660–700 | | Ratio needed | Usually 1.00 or higher | 1.00, or below 1.00 at some lenders | | Reserves (3–6 months) | 3 to 6 times the property’s monthly PITIA | | Illustrative example only. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. The ratio depends on the appraiser’s market rent and the actual payment, which aren’t shown. Closing costs are not included. Subject to lender guidelines and may change. To try your own numbers, including the property tax for a specific Tennessee address, use the [Tennessee mortgage calculator](https://valor.mortgage/mortgage-calculator/). ## What are the catches with DSCR loans? - Rates and fees are generally higher than on a conventional investment loan, because these loans aren’t sold to Fannie Mae or Freddie Mac. - Prepayment penalties are common; plan your hold period before you choose one. - The appraiser’s market rent, not your projection, usually sets the ratio. - “No income verification” still means documents: leases, rent receipts, bank statements for reserves, credit, insurance, and entity papers for an LLC. - If you have W-2 income and few properties, a [conventional investment loan](https://valor.mortgage/conventional-loans/) may cost less. Compare both. ## DSCR loan FAQ ### What is the minimum DSCR for a rental property loan? Most lenders want 1.00, meaning the rent covers the full monthly payment. Some require 1.20 or 1.25 for their best terms, and some allow 0.75 or no ratio with a larger down payment and higher credit. Program terms are subject to lender guidelines and may change. ### What credit score do you need for a DSCR loan? Published 2026 guidelines start between 620 and 700. At 620, lenders typically cap the loan at 55%–70% of the value; the highest loan-to-value tiers usually need 700 to 720 or more. Program terms and eligibility are subject to lender guidelines and may change. ### Can you get a DSCR loan in an LLC? Yes. Most DSCR lenders allow an LLC or other entity to own the property, with the members personally guaranteeing the loan. Some require the guarantors to own at least 51% of the entity. You’ll provide the articles of organization, operating agreement and EIN letter. ### Can a first-time investor get a DSCR loan? At some lenders, yes, usually at 80% loan-to-value or less with extra reserves. Others require at least 12 months of owning and managing rental property. Many DSCR programs don’t accept first-time homebuyers. Program terms and eligibility are subject to lender guidelines and may change. ### Can you use Airbnb income for a DSCR loan? Often, yes. Lenders use 12 months of booking-platform history on a refinance, or an AirDNA projection on a purchase, and some reduce the income by 20% for management or limit short-term rentals to experienced investors. Check local short-term rental rules before you buy. ## Where these figures come from | Figure | Source | As of | |---|---|---| | DSCR formula, rent rules, ratio tiers, reserves, prepayment structures, experience rules | [MAXEX DSCR Program Guide v13](https://www.maxex.com/wp-content/uploads/2026/05/MAXEX-DSCR-Program-Guidelines.pdf) | May 15, 2026 | | Ratio tiers, credit and LTV grid, short-term rentals, first-time investors | [LoanStream Wholesale DSCR Matrix](https://loanstreamwholesale.com/wp-content/uploads/2026/10/LSM-DSCR-Matrix-dtd-10.08.26.pdf) | Effective Oct 8, 2026 | | Credit floor, sub-1.00 ratio rule, mixed-use | [A&D Mortgage Product Matrix](https://admortgage.com/wp-content/uploads/Product_Matrix_Aug_31_2026.pdf) | Aug 31, 2026 | | Tennessee prepayment law | [Tenn. Code Ann. § 47-14-108](https://codes.findlaw.com/tn/title-47-commercial-instruments-and-transactions/tn-code-sect-47-14-108/) | Retrieved Oct 27, 2026 | | Business-purpose exclusion from ability-to-repay | [CFPB, Regulation Z § 1026.43](https://www.consumerfinance.gov/rules-policy/regulations/1026/43/) | Current regulation | ## Related guides - [Non-QM loans](https://valor.mortgage/non-qm-loans/), [bank statement loans](https://valor.mortgage/bank-statement-loans/) and [P&L loans](https://valor.mortgage/pl/). - [Conventional loans](https://valor.mortgage/conventional-loans/), including investment-property rules. - [Robertson County mortgage guide](https://valor.mortgage/mortgage-loans-robertson-county-tn/). - Davidson County and metro buyers can work with me as a [mortgage broker in Nashville](https://valor.mortgage/nashville-mortgage-broker/). - [About Christopher Armantrout](https://valor.mortgage/about-us/), the licensed originator who wrote this page. [Call me at (615) 671-9178](tel:+16156719178). Send me the address, the rent and what you plan to put down, and I’ll tell you whether it clears a DSCR program or would do better as a conventional investment loan. If it’s after hours, [grab a time on my calendar](https://valor.mortgage/book-your-appointment/), or [start an application](https://valor.mortgage/purchase/) and I’ll review it and reach out with a plan. About the author [Christopher Armantrout](https://valor.mortgage/about-us/) Owner & Senior Loan Officer, Valor Mortgage NMLS #1210804 Christopher is a licensed Mortgage Loan Originator in the State of Tennessee and has been originating home loans since 2015. He founded Valor Mortgage in Springfield in 2019 and works with veterans, first-time buyers, self-employed borrowers, and families across Robertson County and Middle Tennessee. [More about Christopher](https://valor.mortgage/about-us/) [Verify this license on NMLS](https://www.nmlsconsumeraccess.org/EntityDetails.aspx/INDIVIDUAL/1210804) **Valor Mortgage, LLC** · Christopher Armantrout, Mortgage Loan Originator, NMLS #1210804 · Valor Mortgage, LLC is powered by Encore Lending Group, LLC, NMLS #1249911 · Licensed in Tennessee · Equal Housing Opportunity 724 S Main St, Springfield, TN 37172 · (615) 671-9178 · christopher@valor.mortgage · [NMLS Consumer Access](https://www.nmlsconsumeraccess.org/EntityDetails.aspx/INDIVIDUAL/1210804) The dollar figures on this page are illustrative examples for general information only and are not an offer, a rate quote, or a commitment to lend. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Program fees, limits and terms are set by the agencies named above and change without notice; all loans are subject to credit approval, income verification and property appraisal. Not all applicants will qualify. --- ## Contact Valor Mortgage - Christopher Armantrout, Senior Loan Officer, NMLS #1210804 - Phone: [(615) 671-9178](tel:+16156719178) - Email: [christopher@valor.mortgage](mailto:christopher@valor.mortgage) - Office: 724 S Main St, Springfield, TN 37172 - [Book an appointment](https://valor.mortgage/book-your-appointment/) · [Apply online](https://valor.mortgage/home-application/) · [Contact page](https://valor.mortgage/contact-us/) Valor Mortgage, LLC is powered by Encore Lending Group, LLC, NMLS #1249911 ([NMLS Consumer Access](https://www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/1249911)). Christopher Armantrout, Loan Officer, NMLS #1210804. Licensed in Tennessee. Equal Housing Opportunity. All loan programs, rates, terms, and conditions are subject to change without notice. Loan approval is based on borrower qualification, credit review, income verification, and property eligibility. Not all applicants will qualify. Not a commitment to lend.