Credit Score Does Matter on DSCR Loans. Period.

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Credit Score Does Matter on DSCR Loans. Period.

Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

I recently heard someone say credit score does not matter on a DSCR loan because "it's based on the property." That is incorrect.

Yes, DSCR evaluates the property's cash flow. Rent divided by PITIA determines whether the deal qualifies.

But that is only part of the equation.

Credit score directly impacts:

  • Interest rate

  • Points

  • Max LTV

  • Cash-out eligibility

  • Reserve requirements

Every DSCR lender has minimum FICO requirements. If credit truly did not matter, there would be none.

Also, if you are working with a "private lender" offering DSCR financing, in most cases they are not keeping the loan. The cost of capital for most individuals is higher than DSCR rates. These loans are typically sold to institutional buyers or securitized.

The originator makes money on yield spread and points, similar to a traditional mortgage lender.

And the institutional buyer absolutely cares about credit score. Pricing and leverage are adjusted by FICO tier.

Two investors. Same property. Same DSCR.

780 credit score and 635 credit score will not receive the same terms.

DSCR is property-driven. It is not borrower-irrelevant.

Credit is leverage..

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Janice Carter
Real Estate Broker · Atlanta · Member since 2024 · 1k+ posts · 607 votes
7mo

Chris, well said. DSCR is property focused but it is absolutely not credit blind. As a broker, I can confirm that FICO directly affects rate, LTV, pricing, reserves and overall loan structure. Two borrowers with identical DSCR ratios but different credit profiles will not receive the same terms. The property qualifies the deal but credit determines the leverage and cost of capital.

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  • Janice Carter
    Real Estate Broker · Atlanta · Member since 2024 · 1k+ posts · 607 votes
    7mo

    Chris, well said. DSCR is property focused but it is absolutely not credit blind. As a broker, I can confirm that FICO directly affects rate, LTV, pricing, reserves and overall loan structure. Two borrowers with identical DSCR ratios but different credit profiles will not receive the same terms. The property qualifies the deal but credit determines the leverage and cost of capital.

    2Reply
  • Kenneth GarrettPro Member
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    7mo

    @Chris Seveney

    Totally 100% agree. I've probably secured 25 or more DSCR loans over the last few years. Your credit is the first that is done just like any mortgage. The lower the score the higher the interest rate. I do remember the post and I actually thought it was from a lender. @Janice Carter good points as well.  Don’t let anyone tell it only matters that the property cash flows, that is 100% wrong.  

    1Reply
  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    7mo

    Chris knocked it out of the park!  Glad somebody said this.

    1Reply
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 513 votes
    7mo

    Credit score is one of the most important factors for DSCR loans. It will affect whether someone qualifies for a DSCR program at all and if the borrower does, how much of an LTV the borrower will qualify for.

    The credit ranges will vary by lender as DSCR lenders generally write their own guidelines. A 785 credit middle mortgage FICO score will qualify for a higher LTV compared to a 625 middle mortgage FICO score.

    The big difference between conventional and DSCR loans is that the income used to qualify the property in a conventional loan is based on the borrower's personal income and factors in debt to income (DTI) ratios. A DSCR loan is structured based on the actual or projected property rental income. It is possible to buy a vacant property and use the appraiser's rent schedule or projections for the property to structure the loan.

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  • Frankie VozziBusiness Member
    Member since 2025 · 369 posts · 89 votes
    7mo

    Solid take Chris, this is 100% accurate and worth repeating for newer investors, DSCR is property-driven, not borrower-blind. Cash flow qualifies the deal, but credit prices the loan. In the real world, FICO affects: Rate & points, Max LTV, Cash-out eligibility, Reserve requirements, Two borrowers, same rents, same DSCR → very different terms if one is 780 and the other is 630.

    Anyone saying "credit doesn't matter" is oversimplifying (or selling). Most DSCR loans are institutionally backed or securitized, and those buyers absolutely tier pricing by credit score, DSCR determines if the deal works. Credit determines how good the deal is.

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  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    7mo

    What are you seeing for rates and % in origination fees at 75 LTV for 780 credit now say 300k buys?

    1Reply
    • Chris SeveneyBusiness Member
      Moderator
      OP
      Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
      7mo
      Quote from @Henry Lazerow:

      What are you seeing for rates and % in origination fees at 75 LTV for 780 credit now say 300k buys?


       I no longer am pricing loans (we have a team doing it), but it will also depend on factors such as prepayment penalty, interest only vs. full am etc. Lenders have pricing guidelines and certain criteria can add or reduce the interest rate on the loan. 

      I believe someone can get something in the low 6's today for a DSCR.

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    7mo

    Solid post

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  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    7mo

    Honestly, it's an improvement from a post about 1-2 years ago where someone said price doesn't matter because of rate(think owner finance, or subto, or some sort). And we both commented on it as we were both shocked to hear that.

    I'll take the bright side of this and for someone to question credit scores on a loan product is a small improvement for this crowd of wannabes. 

    0Reply
  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    7mo
    Quote from @Chris Seveney:

    I recently heard someone say credit score does not matter on a DSCR loan because "it's based on the property." That is incorrect.

    Yes, DSCR evaluates the property's cash flow. Rent divided by PITIA determines whether the deal qualifies.

    But that is only part of the equation.

    Credit score directly impacts:

    • Interest rate

    • Points

    • Max LTV

    • Cash-out eligibility

    • Reserve requirements

    Every DSCR lender has minimum FICO requirements. If credit truly did not matter, there would be none.

    Also, if you are working with a "private lender" offering DSCR financing, in most cases they are not keeping the loan. The cost of capital for most individuals is higher than DSCR rates. These loans are typically sold to institutional buyers or securitized.

    The originator makes money on yield spread and points, similar to a traditional mortgage lender.

    And the institutional buyer absolutely cares about credit score. Pricing and leverage are adjusted by FICO tier.

    Two investors. Same property. Same DSCR.

    780 credit score and 635 credit score will not receive the same terms.

    DSCR is property-driven. It is not borrower-irrelevant.

    Credit is leverage..

    I would add to this that yes credit still matters even if you are going to vest the title in a LLC. The LLC (very likely) has zero credit, assets etc so you as the owner of the LLC will still give a personal guarantee and the loan pricing will be based on your personal credit score.

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