DSCR Loans for Short-Term Rentals, Multifamily, and Commercial Properties

Investment Property Lending Rates in 2025: A Simple DSCR Loan Guide

May 9, 2025

Commercial Real Estate Investment, Knowledge Center, Mixed Use Real Estate Investment, Real Estate Investments Guides, Smart Financing

DSCR Loans – Qualifying Based on Property Income

A popular financing option for investors is the DSCR loan, where DSCR stands for Debt Service Coverage Ratio. Don’t let the term scare you – it means the lender looks at the property’s income (rent) to decide if you qualify, instead of your income. In simple terms, the lender asks: “Will this property earn enough to pay the loan each month?” If so, you have a good DSCR. The property can pay for itself if the rent exceeds the monthly mortgage payment (a DSCR above 1). With a DSCR loan, you typically need to put about 20-25% down and have a decent credit score, but you don’t need to show personal income or job pay stubs.

Typical interest rates: DSCR loan rates 2025 are generally around 6.5% to 8.5%, depending on the market deal offer. That’s a bit higher than rates for a mortgage on a home you live in, but it’s the trade-off for easier qualification. DSCR loan rates are much lower than hard money loan rates. Hard money (a typical short-term loan for investors) often comes with rates starting around 9–10% and going up to 12% or even more. If your goal is a long-term investment property, a DSCR loan offers a relatively affordable rate compared to most commercial hard money loans in 2025.

Key Factors That Affect Your Rate

Several factors can influence the interest rate a lender offers on an investment property loan:

Property Type: Standard houses typically get lower rates than multi-unit or commercial buildings. The lender may charge more if a property’s income is less predictable (e.g., a vacation rental or mixed-use property).
Loan Term: Short-term loans usually have higher rates, while long-term loans offer lower rates.
Down Payment (LTV): The larger your down payment, the safer the loan is for the lender and the better your rate. For example, a loan at 80% of the property’s price may have a higher rate than a loan at 70%.
Borrower Profile: Good credit and investing experience can help you get a lower rate. First-time or low-credit borrowers might pay a bit more.

DSCR Loans for Short-Term Rentals, Multifamily, and Commercial Properties

DSCR loans are flexible and can work for various types of investment properties:

Short-Term Rentals (Airbnb/Vacation Homes): Lenders might use either a market rent estimate or your actual Airbnb income to qualify. Because that income can be seasonal, lenders may require a higher DSCR or charge more interest. However, short-term rentals do qualify for DSCR loans.
Multifamily Properties (Duplexes/Apartments): DSCR loans also work for multi-unit buildings. Having multiple tenants can make it easier to cover the mortgage (if one unit is empty, the others still bring in rent). The lender looks at the total rent from all units. If the combined rent covers the loan payment, you can get a DSCR loan for a multi-unit property.
Commercial Deals (Retail/Office/Mixed-Use): Lenders also care about DSCR for commercial properties – does the rent from the business tenants cover the loan? Commercial DSCR loans might often come as shorter-term loans or have a slightly higher rate. However, if the building has stable tenants (for example, a shopping center with lease contracts), you can finance it as long as the rental income is enough to pay the mortgage. The concept doesn’t change: the property should generate sufficient cash to cover the loan.

Ready to Invest? Apply for a Loan

When ready, visit our financing page to apply or learn more about your options. Securing a reasonable rate now can save you money in the long run. Please start your application today and let us help turn your investment plans into reality.