TurkMortgages.com (a team of NEXA Mortgage, LLC) · Ethan Morgan NMLS #2738407 · NEXA Mortgage, LLC Corp NMLS #1660690
Qualify based on what matters — rental income, not your W-2. Texas's strongest investment loan for portfolio growth, BRRRR refinancing, and cash-out without income verification.
DSCR stands for Debt Service Coverage Ratio — a measurement of whether a rental property's income covers its mortgage payment. A DSCR loan qualifies you based entirely on the property's cash flow, not your personal income, employment history, or tax returns.
This makes DSCR loans the preferred financing tool for real estate investors — especially those who are self-employed, own businesses, have complex tax returns showing low net income from deductions, or who are rapidly growing a portfolio and don't want income limitations slowing them down.
The DSCR formula is simple: Monthly Gross Rent ÷ Monthly PITIA (Principal + Interest + Taxes + Insurance + HOA) = DSCR. A DSCR of 1.0 means rent exactly covers the payment. A DSCR of 1.25 means rent covers 125% of the payment — strong cash flow. A DSCR of 0.85 means rent covers 85% — negative cash flow but some lenders still approve.
| Factor | DSCR Loan | Conventional Investment |
|---|---|---|
| Income Qualification | Property rental income only | Personal W-2/tax returns required |
| DTI Calculation | Not calculated — DSCR only | Must qualify on personal DTI |
| Tax Returns | Not required | 2 years required |
| LLC Ownership | Allowed | Usually not allowed |
| Properties Financed | Unlimited | Max 10 conventional |
| Self-Employed | No issue | 2 years self-employment history needed |
| Interest Rate | Slightly higher (6.5–8.5%) | Slightly lower (6.0–7.5%) |
| Max LTV (Purchase) | 75–80% | 80–85% |
| Closing Speed | 14–21 days typical | 21–30 days |
| Property Types | SFR, multi, STR, mixed-use | SFR and 2–4 unit primarily |
Texas has some of the highest property taxes in the U.S. (1.7–2.5% of value). On a $350,000 investment property in Houston, that's $612–$729/month in property taxes alone — included in your PITIA. This significantly lowers your DSCR compared to a similar property in a low-tax state. Always model with accurate local tax rates before purchasing. A property that cash-flows in another state may not cash-flow in Texas.
| Requirement | Standard | Better Profile | Notes |
|---|---|---|---|
| Min Credit Score | 640 | 720+ for best pricing | 660+ for cash-out refi |
| Min DSCR | 1.00 (most lenders) | 1.25+ for best terms | Some go to 0.75–0.85 |
| Purchase Max LTV | 75–80% | 75% for best pricing | 20–25% min down payment |
| Cash-Out Refi Max LTV | 70–75% | 65–70% for best rate | 700+ FICO required for 75% |
| Rate/Term Refi Max LTV | 75–80% | 70–75% for best pricing | Same as purchase typically |
| Reserves (post-close) | 6 months PITIA | 12 months for best terms | Per property typically |
| Income Verification | None required | None required | Property income only |
| Max Loan Amount | Up to $3.5M typical | $1.5M for standard programs | Jumbo DSCR available |
| Property Types | SFR, 2–4 unit | 5–10 unit (some lenders) | STR, LTR, mixed-use eligible |
| LLC Vesting | Allowed | Allowed | Keep personal assets separate |
| Prepayment Penalty | Often 3–5 years | Can be waived (higher rate) | Negotiate if planning to refi |
DSCR = Monthly Gross Rent ÷ Monthly PITIA
| Property | Monthly Rent | P&I | TX Property Tax | Insurance | HOA | PITIA | DSCR |
|---|---|---|---|---|---|---|---|
| Houston SFR $350K | $2,200 | $1,634 | $613 | $180 | $0 | $2,427 | 0.91 |
| Dallas SFR $400K | $2,800 | $1,867 | $667 | $200 | $0 | $2,734 | 1.02 |
| Austin SFR $450K | $3,200 | $2,101 | $750 | $230 | $50 | $3,131 | 1.02 |
| San Antonio Duplex $380K | $3,600 (2 units) | $1,775 | $665 | $220 | $0 | $2,660 | 1.35 |
| Houston Condo $280K | $1,900 | $1,308 | $490 | $150 | $300 | $2,248 | 0.85 |
*Assumes 7.25% rate, 30-yr term, 20% down. TX property tax ~2.1% avg. DSCR under 1.0 may still qualify with some lenders but at a rate premium.
Notice how the Houston SFR at $350K has a DSCR of only 0.91 — negative cash flow — despite a $2,200 rent. The property taxes alone ($613/mo) are the culprit. In a low-tax state, the same property with 1% tax rate would have a DSCR of 1.18. Always use actual county-level tax rates, not national averages, when modeling Texas investment properties.
| Property Type | Rent Source | Amount Used | Notes |
|---|---|---|---|
| Long-term rental (LTR) | Executed lease agreement | 100% of gross monthly rent | Most straightforward path |
| LTR — no lease yet | Appraiser market rent analysis | 100% of market rent from appraisal | Works for new acquisitions |
| STR / Airbnb / VRBO | AirDNA 12-month projection | 80% of AirDNA projected income | 20% reduction applied |
| STR — established | 12-month operating history | 80% of historical gross income | Can use platform statements |
| Multi-unit (2–4) | Lease or market rent per unit | 100% combined gross rents | Strong DSCR with multiple units |
| Credit Score | Max LTV | Rate Premium vs 760+ | Min DSCR Available | Programs Available |
|---|---|---|---|---|
| 760+ | 75–80% | Base rate | 1.00 | All programs · best pricing |
| 720–759 | 75–80% | +0.25–0.50% | 1.00 | Most programs available |
| 700–719 | 70–75% | +0.50–0.75% | 1.00 | Standard programs |
| 680–699 | 65–75% | +0.75–1.00% | 1.00 | Limited programs |
| 660–679 | 65–70% | +1.00–1.50% | 1.10 | Fewer options · higher down |
| 640–659 | 60–65% | +1.50–2.00% | 1.20 | Very limited · specialty lenders |
| Below 640 | N/A | N/A | N/A | Not eligible for most programs |
All scenarios assume 7.25% DSCR rate (illustration). TX property tax 2.1% average. 20% down on purchases.
Self-employed · 720 credit · 20% down · $380,000
After rehab · 740 credit · $280K value · pull out capital
LLC vesting · 700 credit · 20% down · $340,000
Short-term rental · 760 credit · 25% down · $420,000
740 credit · $450K value · pull equity for next deal
Strong credit · 740+ · appreciation play · DSCR 0.85
DSCR loans are Non-QM products — not all lenders offer them. Through NEXA's wholesale network, Ethan accesses the leading Non-QM and DSCR specialists. You never deal with these lenders directly — Ethan handles everything.
DSCR lenders at wholesale price differently than retail — and the spread can be 0.25–0.75% on a Non-QM product. On a $300,000 DSCR loan, that difference = $45–$115/month. Plus NEXA's access to multiple Non-QM investors means Ethan can find the best fit for your specific DSCR ratio, property type, and exit strategy.
| Factor | NEXA Broker (Ethan) | Direct / Retail Lender |
|---|---|---|
| DSCR program access | Multiple Non-QM investors — best fit per deal | One program — take it or leave it |
| Sub-1.0 DSCR options | Angel Oak, Acra go to 0.75 | Most retail decline under 1.0 |
| STR / Airbnb | AirDNA income accepted · multiple lenders | Many retail lenders don't offer |
| LLC vesting | Standard — all wholesale DSCR lenders | Often not available at retail |
| Rate | Wholesale pricing — no retail markup | Retail margin built in |
| Texas market expertise | High property tax DSCR modeling | May not account for TX taxes |
Texas is one of the strongest rental markets in the U.S., but property taxes vary significantly by county and can make or break your DSCR. Here's a market-by-market breakdown.
| Metro | Avg Property Tax Rate | Avg SFR Rent | Typical DSCR ($350K SFR) | Market Strength | Best Strategy |
|---|---|---|---|---|---|
| Houston Metro | 2.1%–2.4% | $1,800–$2,400 | 0.88–1.10 | Strong — diverse economy | Duplex, higher-rent areas |
| Dallas–Fort Worth | 1.8%–2.2% | $2,000–$2,800 | 0.95–1.20 | Excellent — population growth | SFR, multi-unit, STR |
| San Antonio | 2.0%–2.4% | $1,600–$2,200 | 0.85–1.05 | Good — stable market | Duplex, affordable SFR |
| Austin Metro | 1.8%–2.2% | $2,200–$3,500 | 0.95–1.30 | Strong — tech + STR demand | STR/Airbnb, luxury rental |
| El Paso | 1.6%–2.0% | $1,200–$1,800 | 0.85–1.10 | Moderate — military base driven | Affordable SFR, government workers |
| Texas Hill Country | 1.4%–1.8% | $3,000–$6,000 (STR) | 1.20–1.80 (STR) | Excellent for STR | Vacation rentals — high DSCR |
| Secondary TX Markets | 1.5%–2.0% | $1,000–$1,800 | 0.90–1.20 | Developing | Higher yield, lower entry price |
The Texas Hill Country (Fredericksburg, Wimberley, Bandera, Kerrville areas) has some of the best DSCR ratios for short-term rentals in Texas. Lower property tax rates (1.4–1.8%), high tourism demand, and AirDNA projections of $4,000–$8,000/month on quality vacation cabins can produce DSCR ratios of 1.5–2.0+ — far exceeding what's possible in urban markets.
| Phase | DSCR Loan | Conventional Investment | Notes |
|---|---|---|---|
| Pre-qualification | Same day | 1–2 days | Only need property address + credit |
| Application to submit | 1–2 days | 3–5 days | No income docs to gather |
| Appraisal | 7–14 days | 7–14 days | Market rent analysis included |
| Underwriting | 3–7 days | 5–10 days | DSCR is simpler — fewer docs |
| Closing | At title company or remote (investment) | Title company | LLC vesting — no homestead rules |
| Total Typical | 14–21 days | 21–30 days | DSCR often faster than conventional |
BRRRR = Buy, Rehab, Rent, Refinance, Repeat. DSCR loans are the perfect long-term hold vehicle for the refinance step — no income docs, based on stabilized rent, and allows capital recycling to fund the next deal.
Traditional lenders require W-2s and personal DTI for investment refis. DSCR eliminates this. After you stabilize a property and get it rented, DSCR lets you pull equity based on the rent — regardless of how many other properties you own or what your tax returns show. This is how investors scale from 1 property to 10+ without hitting personal income limitations.
| Step | Action | Financing Tool | Texas Notes |
|---|---|---|---|
| B — Buy | Purchase distressed/undervalued property at a discount | Hard money, cash, or private lending | TX: No homestead restrictions on investment. Fast close possible. |
| R — Rehab | Renovate to increase ARV and rental income | Same hard money or cash reserves | TX: Permit process varies by city. Budget extra time in Houston/Austin. |
| R — Rent | Place tenant at market rent. Execute lease. | N/A (operating phase) | TX: Strong rental demand statewide. STR possible in many markets. |
| R — Refinance | DSCR refi based on stabilized rent and ARV | DSCR loan — 75–80% of ARV | TX: No seasoning minimum. Can refi once property is stabilized. |
| R — Repeat | Use recycled capital for next acquisition | Hard money or cash again | TX: No limit on number of DSCR loans. Scale indefinitely. |
Houston SFR · BRRRR strategy · DSCR refi exit
5 properties · scaled without additional personal income
Texas's high property taxes can turn a deal that looks profitable into a sub-1.0 DSCR that requires a specialty lender. Always model your DSCR exit before purchasing: use the actual county tax rate, realistic insurance costs (Texas is high), and conservative rent estimates. Call Ethan at 832-605-2616 for a free pre-purchase DSCR analysis.
| Loan Type | Income Docs | Max LTV | Rate Range | Best For |
|---|---|---|---|---|
| DSCR Loan | None | 75–80% | 6.5–8.5% | Portfolio investors, self-employed, BRRRR exit, STR |
| Conventional Investment | W-2 + tax returns | 80–85% | 6.0–7.5% | W-2 investors under 10 properties, best rate |
| Bank Statement (Non-QM) | 12–24 mo bank stmts | 70–80% | 7.0–9.0% | Self-employed with strong deposits, income proof |
| Hard Money / Bridge | Minimal / none | 60–75% ARV | 10–14% | Short-term, rehab, purchase-to-BRRRR refinance |
| Portfolio Loan (bank) | Full docs | 70–75% | 7.0–9.5% | Unusual properties, complex income, high reserves |
| Commercial DSCR (5+ units) | Property NOI only | 65–75% | 7.5–10% | Multifamily 5–25 units, commercial investments |
| Your Situation | Best Choice | Why |
|---|---|---|
| Self-employed, tax returns show low income | DSCR | No income docs — property income is all that matters |
| W-2 with strong DTI under 45% | Conventional | Lower rate, higher LTV available |
| Buying a distressed/rehab property | Hard money then DSCR | Hard money closes fast; DSCR is your exit after stabilization |
| STR / Airbnb property | DSCR | AirDNA income accepted; many conventional lenders won't touch STR |
| Already at 10 conventional loans | DSCR | No conventional limit; DSCR is unlimited |
| Closing in LLC name | DSCR | LLC vesting standard; conventional doesn't allow |
| 5+ unit multifamily | Commercial DSCR | Residential DSCR typically maxes at 4 units |
| Best rate is top priority | Conventional | Conventional rates are 0.5–1.5% lower than DSCR |
Ethan runs DSCR analysis on any Texas property — free, no obligation. Turkish & English. Find out how much you can pull out, what your DSCR is, and which NEXA lender is the best fit.