Debt Service Coverage Ratio (DSCR) Loans in Texas

DSCR loans in Texas are a convenient way to begin or expand your real estate investment portfolio allowing you to buy multiple properties.

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Debt Service Coverage Ratio Loans

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The 6 Most Popular DSCR Loan Lenders in Texas

Key Terms

  • Texas DSCR Lenders allow interested borrowers to jump into the real-estate market with quick loans in the best Texas cities.
  • DSCR loans let borrowers use the tourism industry of Texas to their benefit, paying off their property loans using the $37 billion dollar industry.
  • No matter your portfolio’s needs, lenders have many ways of letting you repay your DSCR loan such as; fixed-rate, adjustable rate, or interest-only.

Texas, known by its moniker as the Lone Star State, is the second most populous state in the US with 29.5 million residents. It is also home to 3 of the top 10 most populated cities in the US; Houston (#4), San Antonio (#7), and Dallas (#9). Texas boasts some powerful industries too, being a leader in Agriculture and Energy. It also is a titan in Tourism. In 2019 $37.5 billion dollars was spent by out-of-state tourists, estimated as 72.5 million people staying in Texas for leisure or business according to Texas Travel Alliance.

The real estate market in those big cities is quite healthy too. The median sold house price for July 2022 in Houston was $351,000, in San Antonio was $335,000 and in the Dallas-Fort Worth area was $415,000. Most surprising an increase came from the Austin-Round Rock location with a median of $515,000, despite being half as populous as Houston. About 63.4% of Texans own their homes compared to 36.6% who rent according to Housing Vacancies and Homeownership from the US Census. Of those rentals 7.4% are empty at any given time. 

The housing market continues to show a strong recovery post-pandemic and Texas may be an attractive place for a prospective real-estate investor. Hip tourist locations like San Antonio and Austin also make for reliable locations for short-term rental set-ups.

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How DSCR loans work

So what are Debt Service Coverage Loans and how do they work? The paired-down version is this; DSCR loans are a type of hard money loan that allows borrowers to repay the loan using rental income. By taking the net income of the property, that is the profits from rent, and dividing it by the operating expenses and loan repayment the lenders will arrive at a DSCR ratio. A ratio of 1.0 or greater means the property pays for all its expenses using the rent income and can sometimes be the minimum DSCR ratio needs to get through underwriting. 

Private lenders like these investor loans because it takes tax returns and bank statements out of consideration for the loan. This not only means the loans are approved faster but that they are also available to more borrowers. For example, small business owners would normally have to prove two years of business for a typical mortgage. With a DSCR loan, the business isn’t even a consideration for purchasing property. Foreign aliens and foreign nationals can also take advantage of DSCR loans this way, as can LLCs, which are barred from typical mortgages.

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Top 6 Texas DSCR loan lenders

If you’re in the market for a real estate investment project in Texas, consider these DSCR lenders that are available for projects in the state.

1. New Silver

New Silver started in 2019 by Kirill Bensenoff and Alex Shvayetsky. They offer a variety of private money lending products like fix and flip, rental, ground up and personal loans.

We contacted New Silver Lending to learn more about their private lending business and here are some of the highlights:

  • Origination fee from 1.875%
  • Loan to cost up to 90%
  • 100% construction financing available
  • Loan to ARV up to 80%
  • Terms are typically 24 months
  • Loan amounts are from $100,000 to $5 million
  • Minimum FICO score is 650
  • No hard credit pull required

When you’re ready to connect with a loan officer, use our form to quickly match with eligible loan programs based on your specific circumstances.

2. Griffin Funding

Griffin Funding is a national mortgage lender company that specializes in the types of loans that are hard to find, such as VA Home home loans, bank statement loans for the self-employed or DSCR loans for real estate investors. They are licensed to work in 21 states and are rapidly expanding.

We contacted Griffin Funding to learn more about their DSCR loans in general and here is what we found:

  • No income or job history verification required
  • No limits on the number of properties
  • Loan amount up to $5 million
  • Minimum 20% down required
  • Interest-only option available
  • Both long-term and short-term rentals are eligible
  • No reserve required on cashout loans. Six months required on all other loans unless DSCR ratio is less than 1.

When you’re ready to connect with a loan officer, use our form to quickly match with eligible loan programs based on your specific circumstances.

3. Angel Oak

Angel Oak is a full-service private money lender that focuses on mortgage products, traditional and non-traditional (non-QM) products. They have platforms to provide both retail lending and direct lending.

We contacted Angel Oak directly to learn more about their DSCR loan program and here are some things to consider:

  • Loans up to $1.5 million
  • No income or employment information required
  • Short-term rentals and VRBOs allowed
  • Properties can be in LLC’s name
  • No limit on number of properties
  • 40 year fixed interest-only available
  • Non-warrantable condos allowed
  • Purchase, cash-out or rate-term refinance

When you’re ready to connect with a loan officer, use our form to quickly match with eligible loan programs based on your specific circumstances.

4. JMAC Lending

JMAC Lending was founded by Christina Pham in 2007. Since that time, JMAC Lending has originated more than 40,000 mortgage loans through its wholesale lending platform, making it one of the largest wholesale lenders in the industry, according to its website. They also include a DSCR loan in their lending portfolio.

We reached out to JMAC Lending to see what we could find out about their DSCR loan program. Here are the program highlights:

  • Loan amounts up to $3.5 million for DSCR ratios >= 1.0
  • Loan amounts up to $3 million for DSCR ratios < 1.0
  • No DSCR ratio restrictions
  • No income and no job required
  • Foreign Nationals OK
  • Gift funds allowed after 10% from borrowers own funds
  • Only 30-days of assets docs. for closing funds and reserves
  • First-time investors: Up to 75% LTV
  • Only one appraisal required up to $2M
  • 30-year fixed, SOFR ARMs 5/6 & 7/6 with Interest-Only options
  • Purchase up to 80% LTV and cash-out up to 75% LTV
  • SFR, condo, 2-4 units and short-term rentals

When you’re ready to connect with a loan officer, use our form to quickly match with eligible loan programs based on your specific circumstances.

5. Truss Financial Group

Founded by Jeff Miller and Jason Nichols, Truss Financial Group focuses on serving business owners and has been in business for over 20 years. They specialize in stated income mortgages and have served thousands of business owners, according to their website.

We asked Truss Financial Group for details on their DSCR loans and here is what they said:

  • Loans are based on the debt service coverage ratio
  • No ratio loans with 25% equity and strong FICO scores
  • 30-year-fixed rate from $100,000 up to $3 million
  • No tax returns of 4506 required

When you’re ready to connect with a loan officer, use our form to quickly match with eligible loan programs based on your specific circumstances.

6. CoreVest

CoreVest started in 2014 and offers a full-range of products for residential real estate investors. According to its website, they have closed more than $20 billion in loans and lends in all 50 states.

We contacted CoreVest to get more details about its DSCR loan and here is what we could find:

  • 5+ rental properties eligible
  • Single-family, condo, townhome, multifamily properties are OK
  • Stabilized (90% leased) portfolio
  • Can lend up to 75% of value
  • 3, 5, 7 or 10 year fixed loan options
  • Purchase or refinance
  • Non-recourse options available
  • Foreign nationals eligible

When you’re ready to connect with a loan officer, use our form to quickly match with eligible loan programs based on your specific circumstances.

What are the main advantages of a Texas DSCR loan?

It is crucial for any investor looking to get into the real-estate investment properties to consider what is best for their portfolio. For example, getting a DSCR loan may not be the best choice if you need to access your money quickly since it is tied-up in a property. Those looking to buy themselves a primary residence home also shouldn’t use a DSCR loan since DSCR mortgage programs are mainly used for investment properties and not residential properties. If your portfolio can support a long-term investment, you have good credit score to qualify for a good interest rate, have enough principal for a down payment, and have identified a subject property that has positive cash flow, then a DSCR loan may be the right loan for you.

One big reason to buy a rental property in Texas is the 29.5 million residents. While most of the state is empty, that huge population is all concentrated in the major four cities . By purchasing a rental in one, or several, of those cities a renter can use a sizable and stable population to fund their investment through monthly payments. For those more interested in short-term rentals consider utilizing the $37 billion tourism industry. A DSCR loan works for both short and long-term rental types.

Because a DSCR loan can qualify for multiple properties, investors can also consider several avenues for diversifying their investment. For example; investing in several properties in one Texas city or splitting the investment in each of the three major cities.

Since the process for qualifying for a DSCR loan doesn’t use W2’s or proof of income they are typically approved in weeks. This is great news for an investor looking to move into the Texas market quickly. Our best lenders offer multiple ways of repaying your loan, the most popular being adjustable-rate, fixed-rate, or interest only mortgages. With them you have the freedom to settle your debt however suits you best. 

If you’re looking to explore hard money in other states, check out our national overview of DSCR loans as a starting point in your search.

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Joshua Holt is a licensed mortgage loan originator (NMLS #2306824) and founder of Biglaw Investor. His mortgage expertise lies in the areas of professional mortgage loans, particularly for lawyers, doctors and other high-income professionals. Prior to Biglaw Investor, Josh practiced private equity mergers & acquisition law for one of the largest law firms in the country.

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