Can investor get a DSCR with a charge off?

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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 689 votes
    3d

    Tammy, short answer is often yes, but it really comes down to the lender's guidelines, so it's worth asking about it specifically up front.

    A 681 is within most DSCR programs' minimum score ranges, though it will affect pricing and max LTV. On most non-QM DSCR programs a charge-off isn't treated like a foreclosure or bankruptcy with a long waiting period, but lenders differ on whether open charge-offs and collections have to be paid off before or at closing, especially above a certain balance.

    The EIDL is the part I'd flag early since it's federal debt. Some lenders look harder at delinquent government debt, and if there's a judgment or lien that shows up on title, that has to be cleared before closing.

    Things that can help: getting the EIDL resolved or onto a documented repayment arrangement before applying, paying revolving card balances well down before the statement dates (lower utilization usually helps the score), disputing anything on his reports that's actually wrong, and then having the lender run a rapid rescore once that's done. Adding a co-borrower with stronger credit is another route on some programs.

    I'd have him pull his full credit report and confirm exactly how the EIDL is reporting (charge-off, collection, or referred to Treasury) before shopping lenders, since that drives the answer more than the score does.

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    • Tammy Fleming
      OP
      Real Estate Broker · Houston · Member since 2024 · 33 posts · 12 votes
      1d

      Thank you Devin

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    • Tammy Fleming
      OP
      Real Estate Broker · Houston · Member since 2024 · 33 posts · 12 votes
      1d

      Any suggestions on DSCR lenders to out

      0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3d

    You will need to provide a letter of explanation to the lender. Some of them will be fine with it. Others might be more hesitant and will scrutinize the deal further, so they may not give you as much leverage as you were anticipating or might structure the deal to be a little bit more conservative.

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    • Tammy Fleming
      OP
      Real Estate Broker · Houston · Member since 2024 · 33 posts · 12 votes
      1d

      Thanks Chris

      0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3d

    Yes you should be able to obtain DSCR financing as long as you are current on your client is current on their other loans and can provide a LOX. The key is presenting the file's strength and weaknesses entirely and working with a lender that can get past the file's weak points. Working with a broker helps tremendously, instead of exhausting time and money spent on appraisals working with lenders that are 50/50 about the deal..

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    • Tammy Fleming
      OP
      Real Estate Broker · Houston · Member since 2024 · 33 posts · 12 votes
      1d

      Thanks Erik

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    • Tammy Fleming
      OP
      Real Estate Broker · Houston · Member since 2024 · 33 posts · 12 votes
      9h

      any suggestions?

      0Reply
  • Ametria Chaney
    Realtor · Memphis, Shelby County · Member since 2026 · 362 posts · 128 votes
    3d

    Tammy, good question to ask on your investor's behalf — and the short version from what lenders here have shared is that a charge-off doesn't automatically rule out a DSCR loan, but the EIDL piece is the part to sort out first. A 681 credit score is generally in range for many DSCR programs, though it will affect pricing and terms, and every lender's guidelines are a little different, so it's worth talking to two or three investor-friendly lenders rather than taking one answer as final. Practically, I'd have your investor pull his full credit report, confirm exactly how the EIDL is reporting, and be ready with a clear letter of explanation and documentation on his other loans being current. Getting that file clean before applying saves a lot of back-and-forth — and underwrite the property conservatively either way, so the deal works even if the rate comes in higher than hoped.

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    • Tammy Fleming
      OP
      Real Estate Broker · Houston · Member since 2024 · 33 posts · 12 votes
      1d

      Thanks Ametria

      0Reply
  • Sal Bossio
    Member since 2026 · 11 posts · 1 vote
    3d

    Tammy, the charge off by itself usually isn't the deal killer on DSCR. It really comes down to the lender's credit overlays. Some just want a letter of explanation. Some want collections and charge offs over a certain balance paid or on a payment plan before closing. So ask that exact question before you send anybody the file.

    Couple things I'd check first. Pull the actual report and see how it's showing, is it still with SBA or has it been sent to Treasury for collection, and is there a judgment or lien tied to it. A judgment is a whole different conversation than a charge off just sitting on the report.

    Other thing, 681 works for DSCR but its right around where pricing and max LTV start to shift, so a few points either way can matter. Worth seeing if anything else on there can get cleaned up quick.

    I'm a loan officer with Barrett Financial, just what I'm seeing on my end.

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    • Tammy Fleming
      OP
      Real Estate Broker · Houston · Member since 2024 · 33 posts · 12 votes
      1d

      Thanks Sal. Can I get your number

      0Reply
    • Sal Bossio
      Member since 2026 · 11 posts · 1 vote
      21h

      Hey Tammy, just sent you a connection request so I can DM you my number.

      0Reply
  • Joe Piccirello
    Lender · Peoria, AZ · Member since 2026 · 51 posts · 13 votes
    3d

    Tammy, I do think there may be a path, but the exact status of the EIDL is everything.

    We have DSCR outlets where charge-offs or collections may be acceptable if they do not impact title. But if the EIDL has become a judgment, lien, Treasury referral, or anything that affects title, that usually has to be resolved before or at closing.

    Best next step: have the borrower pull full credit, confirm whether the EIDL is only reporting as a charge-off or if it has moved to Treasury, judgment, or lien status, and send over the balance, date, credit report language, loan purpose, estimated value or purchase price, rent, PITIA, and desired LTV.

    I'm happy to help you shop it to the right DSCR investors instead of guessing.

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  • Noah WrightBusiness Member
    USA, Nationwide · Member since 2024 · 414 posts · 140 votes
    2d

    Smart to sort this out before the file goes in, Tammy. A charge-off that surfaces mid-underwriting costs everyone time. One thing that helps more than people expect is how strong the deal itself is. DSCR is qualified on the property's rent, so when an underwriter is weighing a credit blemish, rent that covers the payment with room to spare and solid reserves left after closing give them compensating factors to point to. A property that barely gets to 1.0 leaves the charge-off standing on its own with nothing to offset it. The credit story starts the conversation, and the deal is what carries it. What does the property rent for compared to the expected payment?

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  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 531 votes
    2d

    It depends on the DSCR loan program. Every DSCR lender uses their own guidelines so there are some differences and a lot of similarities between programs. What generally matters most as far as on time payments for DSCR lender programs, is multiple missed mortgage payments. That will kill the DSCR loan. For many DSCR loan programs, more than one 30 day late mortgage payment in the last year is a problem for getting a DSCR loan.

    What is most helpful in finding a loan program that will work for your client, is giving the credit information upfront and then having the mortgage broker or lender check to see if it will work for the specific DSCR loan's guidelines. Since DSCR loans are not regulated the same way as conventional owner occupy loans, the rates and fees can be changed upwards all the way up to closing of the loan- that's even when nothing else changes such as the appraisal coming in lower than expected which affects the LTV and rate. Because of that, it's important to do your research and work with an experienced, ethical mortgage professional who specializes in DSCR loans so you won't have a negative experience due to the lack of regulation. Happy to connect to discuss further.

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  • David Sheets
    Lender · Cartersville, GA · Member since 2026 · 19 posts · 5 votes
    2d

    Tammy, a charged-off EIDL doesn't have to kill a DSCR loan. This is one we can do.

    The lender's going to want the story behind it. When it charged off, whether there's any arrangement with the SBA now, and that it has nothing to do with the property he's buying. Have him write that up in a few sentences before the file goes in. It goes a lot smoother when the explanation is there up front instead of coming up in underwriting.

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  • Nyisha Walton
    Lender · Houston, TX · Member since 2026 · 133 posts · 40 votes
    2d

    Tammy, I like that you are checking the DSCR path for your investor before anyone wastes a full application. A charged-off EIDL does not automatically kill a DSCR file, but most lenders will want a letter of explanation and to see that other credit is in good shape around that 681. This is what I do, and I work with a network too, so send me the property type, location, and whether it already has rent, and we can see who can look past that charge-off.

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  • Stephen Foster
    Member since 2026 · 43 posts · 6 votes
    2d

    A charged-off EIDL doesn't automatically kill a DSCR loan. Some lenders care more about the property's cash flow and how the charge-off shows on credit than about the charge-off itself. Have the details ready (balance, date, any payoff or settlement letter). I lend in TX if you want a second set of eyes.

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  • James Loffredo
    Lender · Dallas, TX · Member since 2024 · 28 posts · 11 votes
    2d

    Tammy, the charge-off is the problem here, not the 681. That usually does have to be satisfied. Anything over $5,000 in collections and charge-offs gets paid in full at closing on most programs.

    I’d be interested if it could be paid out of the cash-out proceeds. Some programs allow that when the debt is recorded against the property and it’s business debt, which an EIDL is. If it’s only on the credit report, plan on the borrower paying it with their own cash.

    Do you know the balance, and has the SBA filed a judgment on it?

    I run a boutique lender, so weigh that.

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  • Ryan BakerBusiness Member
    Lender · Strongsville / Cleveland, OH · Member since 2026 · 158 posts · 39 votes
    1d

    Hi Tammy, a charge-off doesn't automatically kill a DSCR deal. With a 681 score, a lot of DSCR programs focus more on whether the rent covers the payment, the down payment and reserves than on one derogatory account, though most will want a letter explaining the EIDL charge-off and will look at whether there's a lien or judgment tied to it and how long ago it happened. Knowing those details plus the property's rent vs. the expected payment usually tells you pretty quickly which programs will work. If you or your client want to walk through the scenario, give me a call (my number's in my signature below).

    – Ryan

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  • Logan LambertPro Member
    Member since 2026 · 19 posts · 9 votes
    1d

    Tammy, I definitely think there's a path here. The biggest question is whether that charge-off impacts title. If it doesn't, in many cases a simple letter of explanation may be sufficient, depending on the lender's guidelines.

    My recommendation would be to work with a mortgage broker who has multiple lending outlets rather than going directly to one lender.

    Unfortunately, one of the biggest problems in our industry is deals falling apart right before the finish line because someone didn't thoroughly vet the file upfront.

    You certainly don't have to work with me, but this is exactly how I approach situations like this. I'll go directly to my underwriting contacts, explain the entire situation, provide the necessary documentation, and make sure we have a green light before submitting the deal.

    If you're speaking with a lender, make sure they have the entire picture of what's going on and have actually reviewed the issue before giving you the green light. If someone immediately says, "No problem, we can get it done," and starts throwing terms at you without doing their due diligence, I'd be very cautious.

    The last thing you want is to waste weeks on a deal only to find out something that could've been addressed on day one is now preventing you from closing.

    The goal should always be to identify potential problems upfront, not when you're approaching the finish line.

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  • J CastroBusiness Member
    Lender · Florida · Member since 2025 · 775 posts · 269 votes
    1d
    Quote from @Tammy Fleming:

    I'm working with an investor who has a 681 credit score but he has an EIDL Covid loan that has been charged off. Can he get a DSCR loan?

    A charge-off doesn't necessarily mean the borrower is automatically disqualified from obtaining a DSCR loan. It will ultimately depend on the lender's underwriting guidelines and the circumstances surrounding the charge-off.

    With a 681 credit score, the borrower may still have financing options worth exploring.

    Different DSCR lenders have different tolerances for credit events, charge-offs, and outstanding government-backed debt. The details matter.

    At JCREIG Capital Funding, we're always willing to review challenging scenarios and explore potential financing solutions rather than automatically saying no.

    Feel free to send me the details. I'd be happy to take a preliminary look and see if we can find a program that fits.

    Sometimes the difference between getting a deal done and getting turned away is simply finding the right lending partner.

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  • Gregory Vassilatos
    Investor · Member since 2026 · 12 posts · 2 votes
    21h

    Tammy, a 681 score by itself usually still has DSCR options, but a charged-off EIDL is not treated like a card charge-off. What matters is how it currently reports (charge-off, collection, Treasury offset, or a recorded lien), because a federal lien has to clear title with any lender, and I would not assume a given lender will accept charged-off federal debt.

    What state and city is the subject property in, and is this a purchase or a refinance? How does the EIDL currently report, and what was the original balance? Share those and I can tell you how a file like that typically gets reviewed.

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  • Etienne Manning
    Investor · Member since 2026 · 24 posts · 7 votes
    14h

    Good post.

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  • Flores MarcusPro Member
    Investor · TX · Member since 2025 · 39 posts · 7 votes
    7h

    Let’s connect. I do have a lender that can help secure this deal for you. 100% financing options with zero down payment options.

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  • Quinton Brown
    Lender · Seattle WA · Member since 2025 · 218 posts · 34 votes
    7h

    Tammy, are you still looking for a second review of this scenario? I’m Rushi with NEXA. I can check the details against lender guidelines before discussing terms. Is this a purchase or refinance, and what property type and state are involved? No client documents needed here. I sent a connection request so we can discuss privately.

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