The Quick Read: A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. In the San Juan Islands, the loan is rarely the hard part. The permit is. Short-term rental income only counts if the rental is legal, and new vacation rental permits are mostly closed. Buy the permit status first, then finance the house.
Key Takeaways
- Permit status decides whether short-term rental income can be counted at all.
- STR purchase leverage typically tops out at 75% LTV, with a 1.00 coverage floor and a 640 minimum score on most files.
- Lenders can land 20-30% apart on the same Airbnb, depending on how they haircut income.
- Ferry disruptions and an April-to-October season make trailing-12 data matter.
- Clearing 1.00 is a qualification test, not proof of positive cash flow.
Key Terms Defined
DSCR: Gross rental income divided by the full monthly obligation on the property.
DSCR Calculator
Run the numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Sep 24, 2026
Prefilled with starting assumptions — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Sep 24, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
PITIA: Principal, interest, taxes, insurance, and any HOA dues, which together form the debt-service side of the ratio.
Trailing-12 history: A year of actual booking-platform income, used to show what an operating rental really earns.
Form 1007: The appraiser’s single-family rent schedule, built for long-term monthly rent.
Lower-of convention: Using the smaller of two income figures, such as a lease-style rent and a market-data projection.
What Does a DSCR Loan Actually Measure?
A DSCR loan measures whether the property’s rent covers the property’s own payment. The formula is gross rental income divided by PITIA. That is the whole test. Traditional personal-income documentation and W-2s are not the centerpiece, though property documentation still is.
Here is the catch that trips up new investors. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation. A file can clear 1.00 and still lose money in a slow ferry summer. Treat the ratio as a lender’s gate, not as your profit forecast.
Across the wholesale network Lendmire works with, most programs want coverage at or near 1.00 to start. Stronger ratios open better pricing and leverage. Sub-1.00 coverage is available through select lenders in the network, with leverage and terms adjusted. The full mechanics live in the complete DSCR loans guide.
Why Is the Permit the First Underwriting Question?
Because a lender can only count rent that is legally earnable. In San Juan County, that puts the vacation rental permit ahead of everything else.
Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income. With that said, the county’s own vacation rental page states that the Council voted 3-0 to limit permits on Lopez, Orcas, San Juan Island, and the outer islands. It also says no new applications are currently being accepted. The one narrow exception, for certain Eastsound Village Commercial and Lopez Village Commercial owners already operating before a set date, had a provisional-permit deadline that has now passed.
The caps themselves, per San Juan Update, are 337 on San Juan Island, 211 on Orcas, and 135 on Lopez, with 693 countywide. Existing permits are not affected, and new ones return only through expiration or attrition, according to Salish Current.
Think about what that means for a buyer. A home with an active, verified permit is a different asset from the identical home next door without one. Permit transferability on sale is not something the research confirms, so get written confirmation from the county before you commit. Not optional.
How Does Underwriting Treat STR Income, Step by Step?
Underwriting works in five steps, and each one can change the outcome.
1. Legality. The file starts with zoning, land-use designation, and permit status. Friday Harbor town-water parcels sit under Town jurisdiction, which is a separate check from the county’s.
2. Income figure. A newly bought property with no hosting history often gets underwritten on a market-data projection or on the appraiser’s long-term rent. An operating rental uses trailing platform history.
3. Appraisal form. The 1007 was designed for long-term rent. STR analysis usually arrives as a narrative addendum, and multi-unit properties use the 1025 operating income form.
4. The ratio. Income divided by PITIA. On islands, insurance, taxes, and possibly private road or HOA fees can weigh heavily on the denominator.
5. The decision. Coverage, LTV, credit, reserves, and property type all get weighed together.
Here is where a broker sees what a single lender’s page cannot. Two lenders can produce coverage numbers 20-30% apart on the same Airbnb. The gap comes from how each one haircuts a market-data projection, how it treats seasonality, and what overlay it applies to resort markets. Most programs use a lower-of convention when two income figures exist, and market projections are usually discounted before use. Shopping the structure matters as much as shopping the property.
What Do STR Programs Typically Require?
For short-term rental collateral, the network’s typical ranges are tighter than standard long-term rentals. Subject to lender guidelines:
| Factor | STR Typical Range |
|---|---|
| Purchase LTV | Up to 75% on strongest files |
| Refinance / cash-out LTV | Up to 70% |
| Minimum credit score | 640 |
| Coverage floor | 1.00 purchase, 1.00 refinance |
| Hosting history | About 12 months expected |
Standard programs run up to $3,000,000, with smaller balances routing through select lenders in the network. Credit above roughly 700 tends to unlock the strongest leverage tiers. Reserves vary by lender, leverage, loan size, and transaction type, commonly around 6 months of PITIA, and larger loans typically step up.
A bigger down payment lowers the monthly obligation and can lift coverage. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
One property-type note matters on islands. Manufactured homes, log homes, and barndominiums are not offered through these DSCR programs. That rules out some rural and cabin-style inventory.
Where Does the General Rule Break?
Several San Juan situations bend the usual playbook. These are the named edge cases worth knowing before making an offer.
No permit, no STR income. Buy a non-permitted home and the file underwrites on long-term rent from the 1007. The investment thesis may not survive that, which is a strategy problem, not a loan problem.
Excluded land and islands. Shaw and Waldron disallow vacation rentals. According to an advocacy group’s older FAQ, the Vacation Rental Work Group, rentals are also barred in certain shoreline and agricultural or forest designations. Treat that as a pointer, not a legal opinion, and verify each parcel.
Resort zoning. The Orcasonian reports the caps do not apply to master-planned-resort-zoned properties, including Roche Harbor Resort. Different rules, different diligence.
Friday Harbor water. The county says the town-water restriction is a Town requirement, not a County one. Confirm directly with the Town.
Village commercial owners. Eastsound and Lopez Village Commercial had a provisional-permit deadline that has now passed, so status should be confirmed on the county page.
DSCR vs. conventional financing
Two common ways to finance an investment property in this market. They qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
How Do Ferries and Whales Change the Income Math?
They make income lumpy. Whale watching peaks April through October, and humpbacks are most commonly seen August through October, per the San Juan Islands Visitors Bureau. A rental earns most of its year in that window.
Ferries add a second risk. Salish Current reported that the visitors bureau tied a broad tourism downturn to Washington State Ferries interruptions, including at least a 4% drop in lodging tax collection. One whale-watching operator was reportedly down over 30% in some months. Anecdotal, yes, but it shows how fast access problems reach revenue.
Why does this matter for underwriting? Because trailing-12 data captures both the good months and the bad ones. A lender annualizing a summer-heavy projection may haircut hard. A lender looking at twelve real months sees the true shape. An operator with the history usually has the stronger file.
Picture an investor with a permitted Orcas home and a full year of platform history. That file usually reads better than an identical purchase with only a projection, because the income is proven rather than modeled. Now flip it. Picture an investor buying a home with no permit and no history, leaning on a projection alone. The lender will likely fall back to long-term rent, and coverage may land below 1.00. In that case, sub-1.00 is available through select lenders in the network, with leverage and terms adjusted. The question worth asking first is whether the deal should be done, not just whether it can be.
Is There an Honest Case for Permit Scarcity?
There is, though it is an argument and not a guarantee. Capped supply can support pricing and occupancy for permitted homes, and a local realtor blog makes that case. But permit status is hard to appraise, so expect wide spread in the STR income figure a lender will accept.
Political risk runs the other direction. Salish Current reports nearly 700,000 visitors a year on average over five years, and 2019 resident surveys in which 94% said the islands are at or over capacity in peak summer. Read that as pressure on future STR policy. The county’s stated purpose for the caps is to balance economic benefit against neighborhood impact and housing availability. Rules could tighten as easily as loosen.
For an investor who wants steady income without regulatory exposure, a long-term rental elsewhere might beat an island STR outright. For an investor who already holds a transferable permit, or who values the whale-watching demand base, the island case is real. The flip point is how much permit and access risk the numbers can absorb.
What Does the Investor Decision Look Like in Practice?
It follows a short sequence. First, verify permit status and land designation in writing. Second, gather the income evidence: trailing platform history if operating, projection plus long-term rent if not. Third, check that coverage clears the program floor with the full obligation counted, including island-level insurance and any road or HOA fees. Fourth, compare structures across lenders, since haircut methods differ so much.
Term structure is another lever. The spine is the 30-year fixed. Extended terms and interest-only periods are available through select lenders in the network, and ARM structures exist for investors who want them. Loans above $2,500,000 generally hold to 30-year fixed structures. Entity ownership, such as an LLC, is common, subject to lender program eligibility.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire, a mortgage broker arranging DSCR financing through select lenders in its wholesale network across 41 markets, including Washington, D.C., can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Reach the team at 828-256-2183.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction. This article is not legal or tax advice, and readers should consult a qualified attorney or CPA about their own situation.
Frequently Asked Questions
Can I use projected Airbnb income to qualify on a San Juan Islands purchase?
Often yes, but not at full value. Projections are typically discounted, and a lower-of convention may apply against long-term rent. Without hosting history, some files underwrite on the appraiser’s long-term rent instead. Approval remains subject to lender guidelines.
Does clearing 1.00 mean the rental will cash flow?
No. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside it. Ferry-driven slow months can leave a file that qualifies but earns thin real returns.
What if the home has no vacation rental permit?
Then no legal STR income exists to count, and the file would typically underwrite on long-term rent. Coverage may fall below 1.00. Sub-1.00 is available through select lenders in the network, with leverage and terms adjusted, but the investment thesis deserves a hard second look.
How much down payment do STR files usually need?
STR purchases typically go up to 75% LTV on the strongest files, so plan on roughly 25% down or more. Refinances run up to about 70%. Credit, reserves, and coverage all shape the final terms.
Do I need experience hosting?
Most STR programs expect about 12 months of landlord or host history, and a score around 640 or higher. Newer investors often begin on long-term rent underwriting, then refinance after building platform history.
Investors focused on short-term rentals can review DSCR loans for Airbnb and short-term rentals.
About Lendmire
Lendmire, NMLS# 2371349, is a non-QM mortgage broker serving real estate investors in 41 markets, including Washington, D.C., through DSCR investor loan programs. Qualification is generally reviewed around the subject property’s rental income, not the borrower’s W-2 history — a practical fit for LLC-titled portfolios and self-employed investors. All scenarios remain subject to lender review and program guidelines. Lendmire has earned two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. San Juan County WA Vacation Rentals
3. Salish Current (permit cap)
5. San Juan Islands Visitors Bureau
6. Salish Current (ferry service)
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Cash Out Refinance on Friday Harbor Investment Property · DSCR Cash Out Refinance Friday Harbor Washington State · DSCR Loans Leavenworth: Investor Financing for Bavarian Village STR, Stevens Pass, Lake Wenatchee, Cascade Mountains & Real Estate Investors
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.