How to Secure a No Ratio DSCR Loan for Investment Property

If you are a real estate investor, you’ve likely heard of the Debt Service Coverage Ratio (DSCR) loan. But there is a specific, powerful niche in this market that many aren’t aware of: the no ratio DSCR loan for investment property.

Today I’m breaking down everything you need to know about this product, why it exists, and how you can use it to grow your portfolio—even if your property isn’t currently cash-flowing.

Guidelines: How to Qualify

While these loans are flexible, they do have specific guidelines to ensure the investment is sound.

1. Investor Experience

You don’t need to be a seasoned pro—first-time investors are welcome! However, there is one major catch: we do not allow first-time homebuyers. You must already own a primary residence to qualify for this specific product.

2. Credit Score Requirements

We like to see credit scores of 700 or better, but we can go as low as 660 for these no-ratio products.

3. Property Types

This is strictly for residential investment properties, specifically 1- to 4-unit properties. This includes non-warrantable condos. If you are looking at 5 or more units, this specific no-ratio product won’t apply.

4. No Personal Income Documentation

One of the best parts? There is no personal income required. We don’t need to see your job history, tax returns, or pay stubs. The loan is based on the asset and your credit, not your 9-to-5.

Financial Breakdown: LTV and Reserves

Because there is no income ratio to lean on, lenders look closely at your “skin in the game” (Loan-to-Value) and your cash reserves.

Loan-to-Value (LTV) Limits

The amount you can borrow depends heavily on your credit score:

• Purchases: Up to 75% LTV (Requires 25% down).
• Rate and Term Refinance: Up to 75% LTV.
• Cash-Out Refinance: Up to 65% LTV.

Reserve Requirements

Lenders want to see that you have a “rainy day fund” to cover the mortgage if the property is vacant:

• Loans up to $500,000: Minimum 3 months of reserves.
• Loans $500k to $2 Million: Minimum 6 months of reserves.

Important Considerations: Prepayment Penalties

Most no ratio DSCR loans are 30-year fixed-rate products. While ARMs (Adjustable Rate Mortgages) exist, their terms are usually not as favorable as those of fixed-rate mortgages. One thing to watch out for is the prepayment penalty. These can range from zero to five years.

• A 5-year prepay will usually give you a lower interest rate.
• A no-prepay option will result in a higher interest rate.

If you plan to flip the property or refinance in a year, choose a shorter prepayment term. If you’re holding long-term, the 5-year prepay is likely your best bet.

What is a No Ratio DSCR Loan?

To understand a “no ratio” loan, we first have to look at the standard DSCR. Typically, a lender assesses incoming income (rent) and compares it to the outgoing mortgage payment (Principal, Interest, Taxes, and Insurance). Usually, lenders prefer a ratio of 1.0 or higher, meaning the property covers its own costs.

However, a no ratio DSCR loan for investment property changes the game.

• Some lenders consider a ratio as low as 0.8 to be “no ratio.”
• Other lenders offer a “true” no ratio product with no debt service coverage ratio requirement.

This means you can still secure financing even if the property has zero cash flow or is technically “upside down” month-to-month.

Why Investors Choose No Ratio Loans

Why would you want a loan for a property that doesn’t cash flow? There are two main reasons:

1. High-Appreciation Markets: In expensive markets (such as the San Francisco Bay Area), properties often don’t cash-flow immediately. However, the appreciation is so high that investors are willing to hold the property for a few years, watch the value skyrocket, and then cash out.
2. Immediate Liquidity: You may have a property slightly upside down, but you need to access cash for another investment. This loan allows you to access capital when traditional lenders say “no.”

Next Steps for Your Investment

If you have an investment property that isn’t cash-flowing but you still need a loan, I’d love to help you navigate the world of no ratio lending. Would you like me to send a custom quote or a calendar link so we can discuss your specific property?