DSCR loans can provide an attractive option for home buyers who are unable to obtain a conventional loan that meets their needs. These loans were originally intended for landlords in Tennessee seeking funds for constructing their own homes.

Additionally, purchasing a house through means other than a DSCR loan would not be an option. Similarly, various types of housing options exist for those looking to purchase homes during times of financial hardship or as part of retirement planning, such as recent credit events loans.

DSCR loans in Tennessee have distinct benefits that make them a compelling choice for borrowers in specific circumstances.




DSCR Loans for Property Investors

If you're a property owner looking to invest in Tennessee, DSCR loans can provide the necessary support for purchasing properties. These loans are backed by the investment property itself, meaning that if repayment becomes an issue, your lender may take ownership of the property and subsequent rental income.

DCSR loans offer affordability and reliability for investors interested in buying multiple properties that generate rental income. Through borrowing funds for various purchases, investors can minimize interest expenses and allocate unused capital toward other investments with ease.

Investing in the booming real estate market of Tennessee can bring substantial returns, albeit with a significant upfront investment which may lower loan payments.

With these specialized loans, property investors have the opportunity to use their current assets as leverage, allowing them to expand their portfolio and generate passive income effectively.


DSCR Loan Tennessee Requirements

Tennessee portrait


To secure a loan with favorable terms, it is important to meet the requirements set by DSCR lenders. These requirements typically include the borrower having a credit score of at least 680, although higher scores may result in better rates and lower loan payments and income verification unless you can prove the property's cash flow potential.

Additionally, lenders will assess your credit history for other factors, such as the amount and duration of tradelines on your report. They will also consider any significant credit events you may have experienced in the past, such as foreclosures, bankruptcies, or late payments.

To ensure responsible lending practices, lenders typically set the maximum loan-to-value (LTV) ratio for purchase loans at 70% to 80%, depending on factors that qualify, such as property type, creditworthiness, and DSCR ratio.

For refinances, the maximum LTV ratio is usually between 65% and 75%. Additionally, many lenders establish a minimum property value requirement of $150k.






Benefits of DSCR Loans in Tennessee

DSCR loans in Tennessee have gained popularity due to their unique features and benefits. Whether you want a rental property for more cash flow, rental income or are looking to secure a loan for a property during times of financial hardship or as part of retirement planning, Tennessee DSCR loans can be an excellent choice.

DSCR loans take into consideration factors beyond credit scores and income when assessing eligibility, which can make them more accessible for borrowers who may not meet the strict criteria of traditional loans.

Real estate investors may want DSCR Loans in Tennessee because they can't take other loans. Despite this, DSCR lending offers several benefits for property investments. DSCR Loans provides low rate and low down payment options to meet any need for your money.

Closing periods might be faster, so you can buy short-term Airbnb rental properties or long-term rental properties. If your investment plan is to buy a rental property, DSCR loans may provide a good choice for rental income.


Pre and Post-Covid Mortgage Stats

Across the nation, the rate of homeownership currently sits at 64.4%, according to recent data from the U.S. Census Bureau's American Community Survey.

However, it's important to note that this percentage varies significantly from state to state. In Tennessee specifically, we see a higher homeownership rate of 66.5%, surpassing the national average.

Prior to the COVID-19 outbreak, mortgage lending data indicated a significant increase in loan originations across all categories in Tennessee. This included home purchase loans, refinances, and home improvement loans, which experienced notable growth from 2018 to 2019.

Notably, traditional home refinance loans displayed remarkable responsiveness to lower interest rates even before the pandemic took hold. For a detailed analysis of how these trends differed among different lenders based on geography, demographic groups, and income levels, please refer to the complete report.

However, the COVID-19 pandemic introduced unprecedented challenges to the market, leading to uncertainties and significant economic disruptions. In Tennessee, mortgage activity saw a significant boost in 2021.

Homeowners took advantage of favorable interest rates by refinancing their existing mortgages, leading to a 4% increase in both home purchase and cash flow out refinance loan originations compared to the previous year.

Although non-cash-out refinancing experienced a decline of 12%, there was still an overall growth of 4% in refinance loan volume due to nearly a 50% surge in cash-out refinances. This increase can be attributed to the enticing combination of low interest rates and increased property values.



Navigating DSCR Loans in Tennessee

Having an investment property in Tennessee can be a lucrative opportunity as it can generate rental income, but it often requires significant financial resources to get started.

Fortunately, DSCR loans can provide the financial support needed to make your investment dreams a reality. In Tennessee, there are several key factors to consider when navigating the DSCR loan process.

Determining Your Debt-Service Coverage Ratio

The DSCR is a critical factor that lenders consider when evaluating loan applications. The DSCR, or debt-service coverage ratio, is a key indicator used to measure the property's ability to cover its debt service payments with its net operating income.

A good DSCR indicates a property that is generating enough income to comfortably cover its debt obligations, which is favorable in the eyes of lenders.

In Tennessee, lenders typically set a minimum target or benchmark DSCR of 1.25 to assess default risk during the loan underwriting process.

Choosing the Right Lender

When searching for DSCR loans in Tennessee, it is crucial to carefully select the most suitable lender. Opt for lenders who possess extensive knowledge and experience in offering DSCR loans specifically tailored for investment and rental properties.

By choosing a lender with a proven track record in this area, you can secure favorable terms and conditions that align with your investment goals.

Utilizing Available Data and Statistics

When evaluating a DSCR loan application in the Volunteer State, it is crucial to analyze relevant data and statistics. Extensive research has highlighted the importance of factors like the loan-to-value ratio and debt-service coverage ratio when assessing borrower creditworthiness and potential default risk.

By closely scrutinizing these indicators, informed decisions can be made regarding loan applications. For example, recent studies have demonstrated that in Tennessee's commercial mortgage market, the contemporaneous loan-to-value ratio and debt-service coverage ratio have a more substantial influence on default risk compared to their original LTV and DSCR counterparts.

Understanding Loan Payments

It is crucial to have a solid grasp of the loan repayments involved in a DSCR loan. This will enable you to effectively evaluate the viability of the investment and guarantee that you can easily fulfill your obligations.

By computing the DSCR, which divides the property's annual operating income by its yearly debt service payment, you can ascertain whether or not it produces enough revenue to cover its debt responsibilities.



Closed DSCR Loans Tennessee

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


Pigeon Forge STR


  Pigeon Forge, TN

  • $1,232,500 Loan Amount
  • Purchase
  • STR 
  • DSCR: 1.61
Gatlinburg STR


  Gatlinburg, TN

  • $840,000 Loan Amount
  • Purchase
  • STR
  • DSCR: 2.04
Nashville STR


  Nashville, TN

  • $168,750 Loan Amount
  • Purchase
  • STR
  • DSCR: 1.93

Frequently Asked Questions about DSCR Loans in Tennessee

Discover why DSCR loans are a smart choice for borrowers and their financial goals.


Absolutely! Investing in rental properties in Tennessee is made even easier with the option of a DSCR loan. This specialized financing solution allows borrowers to secure funding based on their debt-service coverage ratio, making it ideal for purchasing investment properties.

With a DSCR loan, you can access the necessary funds to invest in rental properties and start generating income right away.

The DSCR loan program is accessible via countless lenders, from banks to private lenders. They may also serve a variety of uses such as purchasing and refinancing a portfolio of investment properties, construction and restoration of existing investment properties.

Hard money or the DSCR loan are both financing choices suited to real estate investments. Hard money loans offer short-term financing that is secured by a building, while DSCR loans have an underlying cash flow that offers longer repayment terms.

With a DSCR loan, borrowers are only required to provide a down payment of 5% of the total loan amount. This appealing feature makes DSCR loans an attractive choice for those looking to invest in properties in Tennessee without the burden of a large upfront sum.

map of tennessee

Our DSCR Loans in Tennessee 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