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DSCR loans for Charleston rental property
Long-term financing approved on what the property earns. Houses, duplexes, condos and permitted vacation rentals, with no tax returns or employment check.
DSCR loan terms
| To buy | up to 85% LTV |
| Cash-out refinance | up to 80% LTV |
| Credit scores from | 600 |
| Fixed terms | 5 to 30 years |
| Prepayment choices | 3-year, 5-year or none |
| Typical closing | about 30 days |
At a 600 score the limit is 70% loan-to-value. Stronger credit qualifies for up to 85% on a purchase.
DSCR in plain terms
DSCR is short for debt service coverage ratio. It answers one question: does the rent pay the mortgage? If it does, the loan can be approved without looking at your personal income.
DSCR = monthly rent ÷ monthly payment. The payment counts principal, interest, property taxes, insurance and any owners’ association dues.
| Rent | Payment | DSCR | Reading |
|---|---|---|---|
| $3,900 | $3,000 | 1.30 | Income is 30% above the payment |
| $3,200 | $3,200 | 1.00 | Income equals the payment |
| $2,880 | $3,200 | 0.90 | Income is short; expect less leverage or a higher rate |
We prefer a ratio of 1.0 or higher. A strong borrower can qualify under 1.0 with lower leverage, and there is a no-DSCR option up to 75% loan-to-value at a higher rate.
Which rent counts in Charleston
How a property is rented decides the income we use, and in Charleston that depends on local rules as much as on the property.
- Long-term rentals. Annual leases are the core of the Charleston rental market and are underwritten on the lease or on market rent from the appraisal.
- Mid-term rentals. Furnished rentals of a month or more, popular with traveling nurses and medical staff, military families and people relocating for work, are qualified on their rental history.
- Vacation rentals. Where a property is allowed to rent by the night, we use 12 months of rental history or AirDNA projections counted at about 70 to 80%.
The City of Charleston allows residential short-term rentals only where the owner lives on the property, so an investor-owned house in the city is underwritten on long-term or mid-term rent. Some beach towns and resort communities allow investor-owned vacation rentals under their own licenses. Rules change often, especially on Folly Beach, so confirm what is allowed at a specific address before you buy.
What makes the payment higher in Charleston
- Property tax. South Carolina assesses an owner’s primary residence at 4% of value and other property, including rentals, at 6%. The tax bill on a rental is noticeably higher than the seller’s if the seller lived there, so use the rental figure.
- Flood insurance. Much of the Charleston area sits in FEMA flood zones. Where flood coverage is required, the premium is part of the payment. Ask for an elevation certificate and a flood quote early.
- Wind coverage. Close to the coast, windstorm and hail may be written on a separate policy. Get a full insurance quote, not just a homeowner’s estimate.
- Association dues. Condos and planned communities in Mount Pleasant, Summerville and on the islands charge dues that count in the payment.
Get real figures for each before you make an offer. They decide whether a deal clears 1.0.
Loan options
- Fixed terms from 5 to 30 years. The 10/1 interest-only and the 30-year fully amortized loan are chosen most often.
- Qualifying on the interest-only payment is available.
- A 3-year or 5-year prepayment penalty. The 5-year option usually prices about 0.25 to 0.5% lower. No penalty is available at a higher rate.
- One property or a whole portfolio.
Refinancing after a renovation or a build
If you renovate or build a property and decide to keep it, a DSCR loan replaces the short-term fix and flip or construction loan with long-term debt. A cash-out refinance at up to 80% loan-to-value can hand back much of the cash you put in.
Documents we ask for
- Loan application
- Signed purchase contract, or your original settlement statement for a refinance
- The lease for a long-term rental, or an income statement or booking history for a furnished or vacation rental
- Two months of bank statements
- Insurance and closing attorney contacts, and someone to let the appraiser in
- For an LLC: articles of organization, EIN letter and operating agreement
The full list is in our hard money loan document checklist.
DSCR loans: common questions
We prefer 1.0 or higher, which means the rent covers the full payment. Strong borrowers can qualify below 1.0 with lower leverage, and a no-DSCR program is available up to 75% loan-to-value at a higher rate.
Only where the property is allowed to rent by the night. The City of Charleston limits residential short-term rentals to owner-occupied homes, so investor-owned houses in the city are qualified on long-term or mid-term rent. Where vacation rental is permitted, we use 12 months of history or AirDNA projections counted at about 70 to 80%.
Yes. Furnished rentals leased for a month or more are qualified on their rental history. Without history, we use market rent from the appraisal.
The minimum is 600, at up to 70% loan-to-value. Higher scores qualify for up to 85% of the purchase price.
No. A DSCR loan is approved on the property’s rental income. There is no employment, tax return or debt-to-income review.
Where flood coverage is required, the premium is part of the monthly payment used in the ratio. A high flood premium can push a deal below 1.0, so get a quote before you make an offer.
No. These are business-purpose loans and are not reported on your personal credit like a conventional mortgage. There is no cap on how many properties we will finance for you.
Buying or refinancing a Charleston rental?
Send the address, the price and what you plan to do with the property. We will reply with the leverage and pricing that fit your deal.