DSCR Loan Property Type Eligibility: What Counts as an Eligible Investment Property and What Does Not

DSCR loan eligibility is defined by both the borrower's investment intent and the property type. Most MLOs know DSCR applies to investment properties, but the property type boundaries vary significantly by investor and can disqualify a deal late in the process if not verified at intake.

Standard Eligible Property Types

• ✦Single-family detached (1 unit): universally eligible across all DSCR investors
• ✦2-4 unit residential: eligible at most investors, though some cap LTV at 75% vs. 80% for single-family
• ✦Planned Unit Development (PUD): eligible; some investors require HOA financial review
• ✦Warrantable condos: eligible at most investors, typically with a 5% LTV haircut vs. single-family
• ✦Non-warrantable condos: eligible only at selected investors, often capped at 65-70% LTV

Short-Term Rental Income Treatment

Short-term rental (STR) properties are eligible for DSCR financing at most investors but require different income documentation than long-term rentals. Many investors accept 12 months of Airbnb or VRBO income history in lieu of a lease. Some use a market-rate STR estimate from a third-party service like AirDNA. The DSCR calculation uses the net STR income after platform fees and cleaning costs divided by the monthly PITIA. Most investors require a minimum 1.0x DSCR even for STR properties, with better pricing at 1.25x or above.

Ineligible Property Types

• ✦Commercial properties (office, retail, industrial): not eligible for residential DSCR programs
• ✦Mixed-use with more than 25-35% commercial square footage: ineligible at most investors
• ✦Hotels and motels: ineligible regardless of DSCR; condotels with front-desk service are borderline and require investor-specific review
• ✦Working farms, agricultural land, and properties with income-producing agricultural operations: ineligible
• ✦Properties where the borrower intends to use them as a primary residence: DSCR is investment-only; primary residence use voids the product

5+ Unit Multifamily

Five-unit and above properties are considered commercial real estate and are not eligible for residential DSCR programs. Financing for 5+ unit properties requires a commercial DSCR product or a small-balance commercial loan. Some non-QM investors have separate 5-8 unit programs with DSCR-based qualification, but these are distinct from the residential 1-4 unit DSCR product and carry different LTV, rate, and prepayment structures.