When diversifying your real estate portfolio, you may overlook somewhere very significant: Alabama, which is rich in investment properties from single-family homes to commercial spaces.

With a debt service coverage ratio (DSCR) loan, you can purchase an investment property with a strong outlook - but they don't require income verification like a conventional loan.

Visio makes the DSCR loan process easy, helping you jump into the promising Alabama real estate market sooner than you ever expected. We've helped many investors secure DSCR loans for a variety of property types, and we can help you too.




Why Pursue DSCR Loans in Alabama?

Alabama DSCR loans are an excellent choice for those who want to bet on an up-and-coming economy, which has nearly every investment property type imaginable for entrepreneurs.

From short-term rentals to manufacturing facilities, you have various options here, all of which could prove highly lucrative.


In terms of affordability, Alabama ranks second in the nation according to US News and World Report, which makes it much easier for many investors to build their real estate portfolio with minimal risk.

Economic Diversity

Economic diversity determines a region's ability to weather economic shocks; high diversity also means that there are more opportunities for commercial real estate investors, as they can pick and choose from numerous different niches.

Alabama boasts a 91.1 on the Hachman Index of Economic Diversity, higher than neighboring Florida and Mississippi.

High Rental Demand

About 32% of Alabamans are renters, and the average rent across the state is $1,470. It's been increasing steadily in all of Alabama's major cities, about 4% overall.

Powerful Job Market

The Alabama job market is seventh in the nation; it has an unemployment rate of only 2.1%, very low compared to the US unemployment rate of 3.5%. Low employment helps ensure positive cash flow from all properties, including storefronts and shopping centers.


Benefits of Alabama DSCR Loans

A DSCR loan is a smart way for investors to purchase property in Alabama, as it utilizes the DSCR formula of dividing the property's income by the monthly mortgage payments rather than by your own personal income.

Better yet, borrowers can enjoy competitive interest rates and a higher maximum loan amount, meaning more access to funds than they could pursue through other mortgage loans.

Less Paperwork Than Traditional Loans

With a DSCR loan, a borrower does not need to provide income verification, debt details, or tax returns. This is particularly convenient for foreign nationals, who may have a difficult time securing a mortgage with no American credit history.

Because your personal income isn't relevant, any tax write-offs won't diminish your ability to qualify.

Faster Approval Times

With the reduced paperwork comes a faster approval time: you won't need to wait days, weeks, or months to see whether you're eligible for an Alabama DSCR loan.

Once the lender has the DSCR calculated, they can quickly approve financing, and you'll begin generating income off your investment properties right away. 

Protect Your Personal Assets

Conventional loans can only be obtained under the borrower's own name, which can lead to issues for the borrower should there be issues with the property.

With a DSCR loan, you can purchase through a business entity, meaning that your personal financial information remains private.

Greater Flexibility in Amount of Properties You Can Finance

With a conventional loan, you can only finance ten properties with one loan; however, with DSCR loans, the amount of property you can finance is unrestrained only by having sufficient cash flow over the sum of the rentals.


DSCR Loan - Alabama Requirements

To purchase an investment property in Alabama using a DSCR loan, investors need to meet specific requirements.

Proof of Previous Rental Income

Most lenders want to see that you have experience in renting, as this proves that you understand the risks and rewards involved in real estate investment properties.

Credit Score

The minimum credit score for a DSCR loan is generally 680, though select lenders may allow a lower credit score.

Appraisal Form and 1007 Rent Schedule

The property will need to be appraised, as this will be used to calculate DSCR. You'll also need to show proof of the property's income through previous lease agreements; lastly, you have to submit a 1007 Rent Schedule, which calculates the fair market price for the particular property.

DSCR of 1 or Higher

These types of loans are built off the DSCR ratio, which determines whether the property will generate sufficient cash flow to pay off the loan.

To calculate DSCR, lenders divide the net operating income of the property by the PITIA (principal, interest, property taxes, insurance, and association dues). This identifies whether the property is making more than the monthly mortgage payments, which indicates profitability.

Most lenders want a DSCR of 1.2 or higher, though some lenders like Visio Lending will accept a minimum DSCR of 1.

Loan-to-Value Ratio

The loan-to-value ratio determines your down payment; the average lender wants an LTV of 75% or lower, meaning that you will provide a payment of 25% upfront. Some will accept an LTV of 80%, but almost never 85% or higher.

Down Payment

Once you know the LTV requirements, you'll need to provide the corresponding down payment, typically 20% to 25%. You'll also need to pay closing costs just as with any other real estate deal.




Best Places in Alabama for Real Estate Investors


Alabama is a boundless opportunity for real estate investors, whether they are locals or foreign nationals, but the major cities in this state are your best opportunity for Alabama DSCR loans.

With high populations, economic diversity, and a strong job market, you'll find it easy to general strong cash flow in these vibrant regions.

📍 Huntsville, AL

Outdoorsy Huntsville draws sportsmen as well as museum junkies, making it a great place for vacation rentals and small shops. The average rent for Huntsville apartments ranges between $850 and $1,172, which is quite good, given that the average property value is $280,121. For an office space, you can expect a rent of $22.79 per square foot.

📍 Birmingham, AL

With a thriving healthcare, education, and manufacturing sector, it's no wonder that Birmingham boasts rents between $1,115 and $1,454, some of the highest in Alabama.

Redfin lists that the average property value in the city is about $220,000 right now. This makes Birmingham quite a steal, given that you can command higher rents for a lower upfront cost. For commercial spaces, the rents hover around $22.38 per square foot.

📍 Mobile, AL

The low cost of living and numerous institutes of higher learning make Mobile quite attractive, especially with rents between $834 and $1,270. Average property values are about $184,000, making this a good place for those who want to pad out their portfolio with a strong and steady income. Its commercial rent potential is also lower at approximately $16.17 per square foot.


Closed DSCR Loans Alabama

Check out some of Visio Lending's recently closed DSCR loans in Alabama.


Northport STR


Northport, AL

  • $236,000 Loan Amount
  • Purchase
  • STR 
  • DSCR: 3.55
Muscle Shoals STR


Muscle Shoals, AL

  • $200,000 Loan Amount
  • Purchase
  • STR
  • DSCR: 2.23
Harvest LTR


Harvest, AL

  • $179,000 Loan Amount
  • Cash-Out Refinance
  • LTR
  • DSCR: 1.21

Frequently Asked Questions About DSCR Loans

Any income-producing property is generally eligible for a DSCR loan, which includes:

  • Single-family rentals
  • Multifamily rentals
  • Condominiums and townhouses
  • Retail spaces
  • Industrial buildings
  • Office buildings
Private residential buildings are not eligible for DSCR financing Visio Lending provides financing for 1-4 unit single-family rentals, including vacation rentals.

Yes, you can. Investors may choose a variable interest rate at the onset of their Alabama DSCR loans, then refinance into a fixed-rate loan later on. We can assist with your refinance needs, including finding you a highly competitive interest rate that helps lower your payment.

DSCR lenders typically charge a pre-payment penalty, which is a percentage of the overall loan amount, if you choose to close out your loan ahead of time. These are often on a "step down" schedule, with decreasing pre-payment penalties over the first three to five years.

Because a DSCR loan is usually for 30 years if the borrower pays ahead, the lender risks losing money on the deal, so they build this contingency into the loan to protect their interests.

Usually, the minimum property value is $150,000, while the minimum DSCR loan amount is usually $75,000. If you want to buy a less expensive asset, it may be more prudent to use a conventional loan instead.

Your DSCR loan will not assist with funding for some of the essentials of rentals, including the following:

  • Maintenance and management
  • Income taxes
  • Tenant costs
  • Vacancies
  • Furniture for vacation rentals
For these expenses, you'll need to secure business loans or pay out of pocket.

Any income-producing property is generally eligible for a DSCR loan, which includes:

  • Single-family rentals
  • Multifamily rentals
  • Condominiums and townhouses
  • Retail spaces
  • Industrial buildings
  • Office buildings

alabama map

Our DSCR Loans in Alabama have:

  • · Full 30 year terms, no balloons for rental residential properties

  • · The ability to finance in an LLC

  • · No tax documents or personal income verification

  • · Real estate investor-friendly loan programs

  • · Interest only loan options


Contact Us to Start Your Loan