April 15, 2025
DSCR loans have opened the door for investors who don’t want to rely on tax returns or W-2s to prove income. Instead, they focus on what matters most—the income-generating potential of the property.
But here’s the truth: DSCR loan approvals aren’t automatic. Many investors get denied on their first try, and not because the deal was bad—because the approach was wrong.
If you’ve recently been denied, don’t write off this powerful tool just yet. Let’s dig into what lenders are really looking for—and how to avoid the common pitfalls that can sabotage your next deal.
The Debt Service Coverage Ratio (DSCR) is simple math: it compares the property’s income to its debt obligations. Most lenders look for a DSCR of 1.0 to 1.25 or higher. If your deal only breaks even—or worse, runs negative—you’re likely to get declined.
The fix: Only submit properties that generate strong net rental income after expenses. If a deal is borderline, improve its cash flow potential before applying.
Some investors submit pro forma income estimates, assuming lenders will factor in post-renovation rents or future occupancy. DSCR lenders want in-place income—not projections.
The fix: Provide current lease agreements or real operating income. If the property is vacant, some lenders may accept market rent comps—but approval will be tougher.
Different lenders have different DSCR minimums depending on the market, property type, and loan program. You might get denied by one lender for a 1.0 ratio, but approved by another who accepts 0.9 in stronger markets.
The fix: Work with a lender (like Infinity) who can shop the loan across multiple programs and match you with the right guidelines—not just a one-size-fits-all rejection.
Just because a property qualifies for DSCR-based lending doesn’t mean you can go in with minimal equity. High LTV (loan-to-value) ratios can trigger a denial, especially if the DSCR is just barely passing.
The fix: Keep your leverage balanced. 75-80% LTV is common, but lower is stronger. If you’re close to the edge, consider bringing in a partner or additional capital to reduce risk.
DSCR loans may not require personal income verification—but that doesn’t mean no paperwork. Submitting incomplete rent rolls, unclear operating statements, or missing property docs will slow—or stop—the process.
The fix: Treat DSCR submissions professionally. Clean, complete, and well-organized documentation signals to the lender that you’re ready and capable.
A DSCR denial doesn’t mean you’re not ready for real estate—it means the deal, the approach, or the presentation didn’t meet lender standards. The good news is, most of those factors can be fixed.
At Infinity Commercial Capital, we help investors structure deals that actually qualify—and get approved—under DSCR programs.
Contact us today on how we can help you with your next commercial real estate investment.
