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Debt Service Coverage Ratio (DSCR) Loans in California


DSCR Loans California

Independent Lending specializes in DSCR loans in California. With combined experience of over 40 years and a Zillow 5 Star lender, we offer a smooth, fast and a streamlined process. Independent Lending has funded over $500 million in mortgage lending with our focus on hard money, private money and specialty loan programs. We cater to California investors, first-time buyers and current home owners. Contact Independent Lending today for assistance with your California DSCR loan.

If you’ve ever shopped for a new mortgage loan, you’ve probably overheard your lender use colorful industry
acronyms, like LTV and DTI, to explain the requirements you need to meet in order to qualify. But if DSCR isn’t an acronym that’s part of the conversation, it should be. 

DSCR loans have become increasingly popular over the last couple of years and can be a significantly powerful financing solution, even compared to traditional mortgage programs. The process to qualify is also much more streamlined, which also takes a bit of the stress out of the application process.

Independent Lending clients have found that one of the biggest benefits to using DSCR loans in California is that you don’t need stacks of cash or have a high net worth in order to qualify. Rather, this solution works for both first-time investors or experienced real estate moguls.

You might be asking yourself, “what’s the catch?” Are DSCR loans in California too good to be true? Let’s take a deeper dive into this program and review what a DSCR loan is, how DSCR loans work, and when you should use a DSCR loan in California.


What Sets Us apart


130 Five Star
  • 130 Zillow 5 Star Reviews
  • 5 Star Google Reviews
  • A+ Rating with BBB​


Loans Funded
$ 500 Million
  • 40 Years Mortgage Lending
  • Trusted DSCR Specialist
  • Several Programs


Average Days to Fund
30 days
  • No Upfront Fees Ever!
  • No Ratio Available
  • Direct Lender

What is a DSCR Loan

DSCR loans, or debt service coverage ratio loans, are non-QM mortgage loans that allow borrowers to finance investment properties without having to use personal income for qualification.

Unlike traditional mortgage programs which are heavily influenced by a borrower’s debt-to-income
(DTI) ratio, a borrower can qualify for a DSCR loan in California based on the annual gross rental income the subject property can generate.

To qualify, the annual gross rental income is divided by the new proposed annual mortgage payments, including all property taxes, homeowners’ insurance, and HOA dues (where applicable). The annual gross rental income should exceed the proposed debt to be serviced.

Like other mortgage loans, you can select from a variety of different loan terms with a DSCR loan. California real estate investors have used DSCR loans for years to grow and add both residential and commercial properties to their real estate portfolios.

As the United States continues to experience a housing inventory shortage, rents are forecasted to maintain an upward trajectory making DSCR loans the perfect option to purchase new investment properties throughout California.

What is Considered a Good DSCR Ratio

When qualifying for a DSCR loan in California, your mortgage lender will typically want you to have a DSCR ratio of 1.00 to 1.25 or better. Any ratio above 1.00 means that the property can generate sufficient income on its own to adequately service the proposed debt. 

Some lenders may have more relaxed or conservative ratio requirements, also there can be additional overlays depending on a variety of qualifying factors. It’s always a good idea speak with a qualified loan officer on any new DSCR programs and also do your own independent research on what comparable properties rent for to make sure your tentative DSCR ratio will meet the basic requirements.

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How to Get Approved for a DSCR Loan in California

Independent Lending makes it easy to get an upfront approval for a new DSCR loan. California applicants also don’t have to go through a strenuous mortgage application process like you would using a conforming conventional program.

The first step to getting approved for a DSCR loan in California is to find the right rental property you want to invest in. This could be a commercial or residential (1-4 unit) property. Once you find a property, you will want to make sure the estimated DSCR meets the standard ratio requirements. In case of a cash out refinance, be sure that the subject property in non-owner occupied.

Second, DSCR lenders will also want to complete a 
credit check to verify your track record for managing credit sufficiently. Keep in mind that credit score requirements can vary. Lenders may also want to see that you have a history of making either monthly mortgage or rent payments on time.

Next, make sure you have enough money to cover a down payment anywhere between 15-30% of the purchase price, along with funds to pay for any fees and closing costs.

DSCR lender may also want to verify that you have additional assets that can be used as reserves to cover your monthly DSCR loan payment should the property become vacant at any point in time. Usually, 6-12 months is sufficient.

California DSCR Loan Highlights

(State Specific)

Why Use a DSCR Loan?

DSCR loans are some of the most powerful, flexible loans available, making them the ideal financing for a variety of borrowers with different credit scenarios. Whether you have a purchase or want to leverage a DSCR loan cash out refinance, there are many reasons to utilize a DSCR loan.

One of the biggest reasons to use a DSCR loan in California is that you can qualify without any personal income. Borrowers that are self-employed, work primarily in the 
gig economy, or have other non-traditional methods for repayment often find a much more streamlined approval process compared to conforming conventional financing.

Similarly, using a DSCR loan could be ideal even if you have sufficient personal income to qualify for traditional mortgage programs. Savvy real estate investors will often use DSCR loans to help expand their portfolio because there are several less hoops to jump through.

You can close multiple deals at a time and DSCR loans offer more flexibility in terms of eligible property types that can be used as collateral. If you want to take advantage of the current rental market trends, DSCR loans in California can make it easy to accelerate the number of rental properties you own.

Additionally, you have had recent blemishes to your credit history, you may not qualify for certain types of financing if you haven’t met specific waiting periods or re-established your credit. But using a DSCR loan, California borrowers can qualify for financing even without an immaculate credit history.

Lastly, using a DSCR loan in California doesn’t disqualify you from taking advantage of key rental property tax deductions. Mortgage interest, along with several other operating expenses, can still be tax deductible.

Overall, there are several reasons why you would want to use a DSCR loan in California, which include:

Key Takeaways

DSCR loans, or debt service coverage loans, are the perfect financing solution if you have a lack of personal income or have a unique credit situation.

Whereas traditional mortgage programs strongly consider a borrower’s personal income as part of their repayment capacity and overall approval process, DSCR loans in California allow you to qualify for financing based on the property’s ability to generate sufficient rental income to service the proposed mortgage payment and escrows.

While most borrowers haven’t heard of DSCR loans, California real estate investors and rental property owners understand what a powerful tool DSCR loans can be.

How We Can Help

Real World Scenario

Independent Lending recently funded a $322,500 cash out DSCR loan. The loan was secured by a single family residence located in Wildomar, CA with a value of $500,000. The appraiser supplied the single-family comparable rent schedule (form 1007) and the DSCR ratio came within the parameters for underwriting approval. We were able to finalize the new loan within 3 weeks.

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Frequently asked questions About California DSCR loans

The lender will review your lease agreement(s) and also have an appraisal ordered. The appraiser will supply a form 1007 – single-family comparable rent schedule.  The lender typically will accept the lower of the two numbers.

The lender will use the Net Operating Income (NOI) figure to determine if the subject property will be able to generate the income needed to cover the monthly costs of the new loan. The NOI should typically be grater than the amount of the monthly loan payment. The NOI is calculated by deducting all operating expenses from the gross income.

Market Rent \ PITIA Payment = DSCR

For example: $2,000 month in rent / $1,750 PITIA payment 
= 1.14 DSCR

PITIA= Principal, Interest, Taxes, Insurance, Association dues



Need a California DSCR Loan?


Contact Independent Lending

Call Toll Free: 1.800.315.0043 / Local: 949.830.3151 or click the Contact Us button to fill out our secure web form for a call back. At Independent Lending, we give every loan request the respect it deserves.

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