Arizona DSCR Loans

Use DSCR Loans to Grow Your Rental Portfolio in Arizona

Property investors across the state of Arizona are using debt service coverage ratio (DSCR) loans to expand their portfolios. DSCR is calculated by taking the monthly rental income and dividing it by the property's monthly payments including principal, interest, taxes, insurance, and association dues. The final DSCR ratio is essentially an indicator to the lender of a borrower's ability to repay their loan. Many lenders have a minimum DSCR of 1.0, which indicates more money coming in than out.

DSCR loans are ideal for self-employed real estate investors or for someone with a large investment portfolio. Their simplified approval process and loan terms are designed specifically for real estate investors. Let's take a closer look at the benefits of a DSCR mortgage for investment properties, how it works, and how to qualify.


Arizona DSCR Loans Look at Cash Flow Rather than Personal Income

Traditional loans focus heavily on debt-to-income ratio (DTI) and require substantial documentation including pay stubs, bank statements, employment history and tax returns. Meeting DTI requirements can be tricky for investors with multiple mortgaged investment properties.


Arizona DSCR Loans Offer Flexible Terms and Fees

With a DSCR loan, borrowers can take advantage of full 30-year terms with no balloons. Most DSCR lenders will also have the optionality for interest only loans, rate buy- downs, prepayment penalty buy downs, and rate structure choices. It is great for investors to be able to tailor their DSCR loan program to meet their investment needs. For instance, investors planning to hold onto their rental property long term can choose a fixed rate and pay higher fees, while investors who might sell in the near future can select an ARM rate structure and buy down their prepayment penalty.


Arizona DSCR Loans Have More Flexible Common Sense Limitations on Number of Mortgaged Properties

For the professional investor looking to build a large real estate portfolio, a DSCR program is ideal. Most traditional mortgage lenders max out borrowers at ten loans. Instead, when evaluating qualifications for a DSCR loan, lenders will use common sense to evaluate an investor's maximum credit exposure.


DSCR Calculated and Optimized

To calculate DSCR ratio, use this simple formula:

DSCR = Rent / Principal, Interest, Taxes, Insurance, Association Dues (PITIA)

A debt-service coverage ratio of 1 indicates that the monthly expenses of a subject property are equal to the monthly expenses. For instance, if your monthly expenses are $1,875 per month and your rental income is $1,875 per month, you are breaking even. A good DSCR ratio is a 1.2 or higher. If your DSCR ratio is too low, there are some simple ways to optimize it:

1. Increase your down payment. Raising your down payment is the simplest way to improve DSCR. This will lower your rate, and therefore your monthly expenses and DSCR.

2. Buy down your interest rates. Some DSCR lenders will provide you with the opportunity to buy down your rate. This will increase your closing costs, yet decrease your monthly payments and debt-service coverage ratio.

3. Increase rents. If you do not already have a lease agreement in place, consider raising the rate to increase the amount of monthly cash flow and, therefore, debt-service coverage ratio.

4. Provide upsells to increase rental rates. If you are able to increase the rental income by providing upsells, such as renting to pets or providing a furnished rental, this will help you optimize your DSCR.




The Arizona DSCR Loan Process

The DSCR loan process is much simpler than the conventional mortgage process. Let's break it down in three basic steps:

Step 1

Step 1: Complete the DSCR loan application.

Apply for your DSCR mortgage loan and get the investment property appraised, including expected market rent.

Your loan officer will get your credit evaluated to make sure you meet the minimum credit score qualifications.

Step 2

Step 2: Move into processing.

Once your application is complete, your DSCR loan will move into processing. DSCR mortgage processing is relatively simple since the lender is mostly looking at the investment property quality and rental income potential.

No tax returns, no pay stubs, no employment history, and no personal income history.

Step 3

Step 3: Close and get funds.

Once your DSCR loan is processed, it will move into underwriting and quality control. From there, it will be funded.

You'll cover your down payment and fees and then receive funding.


DSCR Mortgage Nuances

Financing a DSCR loan requires specific expertise and differs from other loans in terms of:

Underwriting Requirements: As an example, personal income history and tax returns are not considerations when underwriting a DSCR mortgage.

Appraisal Process: For a DSCR loan, an evaluation is needed of comparable rents in the area to determine market rent.

Borrower Types: Often a real estate investor finances properties in an entity, which in itself has some lending nuances.  For instance, there are necessary entity documents needed to qualify.

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Arizona is a Budget-Friendly State for Investors with a Low Median Price Point

According to NuWire, Arizona’s growing population, strong economy, and great weather make the state ideal for investors. Not to mention its $240,000 median home price makes the state affordable. 

Phoenix is the number one Arizona city where we originate investment property loans. RentCafe reported the average rental income is $1,590, and the city is 44% renter-occupied. A close second in loan origination volume for us in Arizona is Scottsdale. Not to far from Phoenix, Scottsdale is slightly more expensive with an average rental income of $2,087. There are also less rental properties with a 33% rental occupancy rate (Source: RentCafe).  

If you’re considering buying rental properties in Arizona, here’s where NuWire recommends you look in addition to Phoenix and Scottsdale:

  • Tucson: This family-friendly town has a cost of living well below national average, as well as wonderful public schools.
  • Tempe: Home to Arizona State University, Tempe has an abundance of college renters. The city also has a booming job market.
  • Mesa: Not too far from Phoenix, rental homes get taken off the market quickly. Plus, the entry point is affordable with a median sale price of $300,000



Closed DSCR Loans Arizona

Check out some of our recently closed DSCR loans in Arizona.


Phoenix, AZ  DSCR Page


Phoenix, AZ 

  • $543,750 Loan Amount
  • Cash-Out Refinance
Scottsdale, AZ DSCR


Scottsdale, AZ 

  • $227,200 Loan Amount
  • Purchase


Sedona, AZ 

  • $1,080,000 Loan Amount
  • Purchase
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We are proud to offer investors in Arizona:


  • · The ability to qualify based on rental income; No tax returns or pay stubs

  • · Investor-friendly loan options including prepayment penalty and rate buy-downs

  • · Full 30-year terms, no balloon

Contact Us to Start Your Loan