DSCR Loans in Tennessee: How Rental Property Loans Qualify

What DSCR Means

DSCR stands for debt service coverage ratio: the monthly rent divided by the monthly payment, including principal, interest, property taxes, insurance and any HOA dues. A property renting for $2,400 with a $2,000 total payment has a DSCR of 1.20. Most programs want 1.0 or higher, and a ratio of 1.20 or more usually earns better pricing and leverage. Some programs allow ratios below 1.0 with lower leverage.

Rates and Terms in 2026

DSCR loans are 30-year loans, fixed or adjustable, with interest-only options on some programs. In October 2026 most rates are in the 7s, with 1 to 2 points, and they move with the bond market, so a quote is only good for a short window. Expect a step-down prepayment penalty, such as 3 years, in exchange for the lower rate.

Purchases typically go up to 80% of the price, and cash-out refinances up to around 75% to 80% of the appraised value depending on credit and the ratio.

What You Need to Qualify

There is no tax return or W-2 review. Instead the file is built around the property and the entity:

• An LLC or other entity to hold title
• A lease, or a market rent estimate from the appraiser for a vacant property
• Credit score, typically 660 or higher for the best programs
• Reserves, usually a few months of payments in the bank
• Insurance quote and property tax figures
• For a refinance, the payoff and the date you bought the property

Seasoning and the BRRRR Refinance

Seasoning is how long you have owned the property before a cash-out refinance. Many lenders want 6 to 12 months, which strands your cash in a BRRRR deal. There are programs with no seasoning requirement that refinance on the new appraised value as soon as the rehab is done and the property is rented, which lets you pull your capital out and buy the next one.

Short-Term Rentals and Rural Properties

Short-term rentals in Nashville and the Smokies can qualify using projected or historical short-term rental income, with somewhat stricter requirements. Rural properties are fundable when the appraisal has reasonable comparable sales, which matters across much of Tennessee where many DSCR programs stop at the city limits.