The Quick Read: The total is three separate piles of money: your down payment, your closing costs and prepaids, and reserves that must still be sitting in your account after the loan funds. Most investors budget the first pile and get surprised by the other two. Reserves are not spent, but they are tied up, and the same dollar cannot count twice.
- Down payment: on a purchase, most files land at 75%-80% loan-to-value (LTV), so you fund 20%-25%. Select high-leverage programs reach 85% LTV with roughly a 700+ score.
- Closing costs: lender and third-party fees, plus prepaid taxes and insurance and initial escrow deposits. Seller credits and earnest money already paid reduce the cash due.
- Reserves: commonly about 6 months of the full monthly payment (PITIA), stepping up to about 9 months on loans above $1,500,000.
- Credit and coverage: both set your leverage tier, which sets your down payment.
Here is the plain version. A DSCR loan is a loan where the property’s rent, not your paycheck, does the heavy lifting in the qualification. The lender still checks your cash. This guide walks through how, step by step, so you can size a budget before you make an offer.
DSCR Calculator
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 29, 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 Oct 29, 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.
What Does “Cash Needed” Actually Mean?
Cash needed means everything you must wire at closing plus everything you must still hold afterward. Those are two different tests. One is about the day you close. The other is about the day after.
Across the wholesale network Lendmire places files with, lenders look at both. The rent decides whether the property supports the loan. Your bank statements decide whether you can fund the deal and survive a vacant month or a surprise repair.
The table below separates the terms that get blurred together.
| Term | When you pay it | Do you get it back? |
|---|---|---|
| Down payment | At closing | No, it becomes equity |
| Closing costs | At closing | No |
| Prepaids and escrows | At closing | Partly, as taxes and insurance get paid |
| Reserves | Held after closing | Yes, it stays your money |
| Cash to close | Total wired at closing | Not applicable |
The federal consumer-finance regulator’s Loan Estimate explainer lays out the arithmetic for a consumer mortgage. Estimated cash to close is the down payment plus closing costs, minus any deposit you already paid, seller credits and other adjustments. That formula carries over to investor loans. The forms themselves do not apply to DSCR loans, which are business-purpose and sit outside those consumer disclosure rules.
Step 1: Fix the Leverage
The down payment is 100% minus the maximum LTV the program allows on your file. That cap is not one number. It moves with five things:
- Your credit score
- Your coverage ratio
- The property type
- The loan size
- Whether it is a purchase or a refinance
On a standard purchase, most programs in the network sit at 75%-80% LTV. The 85% tier exists, but it generally asks for a score near 700 or better and stronger coverage. Credit floors start at 620 in parts of the network. Most programs want around 660, and 700+ opens the strongest tiers. Everything here is subject to lender guidelines and varies by borrower and property.
Bigger down payments help. Putting more down shrinks the loan, which lowers the monthly payment and can lift your DSCR. But it never erases a credit floor, a reserve rule or a property-eligibility rule. The strongest files clear both tests: enough equity and enough rental coverage.
Step 2: Add Closing Costs and Prepaids
Closing costs are the upfront charges for getting the loan and transferring the property. They include lender fees, appraisal, title and settlement charges. Then come prepaids: interest owed from closing to month-end, plus the first stretch of property taxes and insurance, plus initial escrow deposits.
Prepaids are the part people misread. They are your own money moving into escrow, not a fee you lose. They still have to be in your account on closing day.
Two clarifications save arguments later:
- Closing costs do not enter the DSCR. The ratio is rent divided by the monthly payment. Costs affect your cash to close. If you roll any into the loan, they also affect the loan amount and LTV.
- A seller credit does not improve the DSCR. It only reduces the cash you bring.
The layout of a settlement statement is easy to see in the regulator’s sample Closing Disclosure. Loan costs and other costs roll into total closing costs. Prepaids and the initial escrow payment sit within other costs. The cash-to-close line is calculated on page three. A DSCR file typically closes on a settlement statement instead, but the pieces are the same. Treat the sample as a map of where each charge lives, never as a source of numbers.
Step 3: Subtract Credits and Deposits
Earnest money you already paid counts toward cash to close. Negotiated seller credits reduce it too. So cash to close is the down payment, plus costs and prepaids, minus those credits.
This is also a more affordable way to lower your wire. Negotiate a credit or a lower price rather than hoping a lender trims fees. Just remember a credit has no effect on coverage and does not change your reserve requirement. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Step 4: Hold Reserves After Closing
Reserves are liquid funds you must still have once the loan funds, counted in months of PITIA. PITIA stands for principal, interest, taxes, insurance and association dues. It is the full monthly obligation on the property.
Reserve rules vary by lender, leverage, loan size and transaction type. Here is how they usually shake out across the network:
- Commonly about 6 months of PITIA.
- Conservative rate-and-term refinances at modest leverage, under $1,500,000, can see reserves waived.
- Loans above $1,500,000 typically step up to about 9 months.
- Cash-out refinances often step up, too.
The rule that trips people: the same dollars cannot be both your down payment and your reserves. If you have exactly enough to close, you do not have enough. Move the math to a worksheet and test it, as shown below.
How the Three Piles Stack: A Scenario Table
Dollar totals depend on price, the property’s tax and insurance, and the closing date. So this table works in shares and months, not dollars. Read each row as a pattern, then plug in your own price using the calculator or a lender’s figures.
| Scenario | Down payment | Reserves after closing | What shifts the cash |
|---|---|---|---|
| Standard purchase, solid credit | 20%-25% of price | About 6 months PITIA | Costs, prepaids, credits |
| High-leverage purchase, 700+ score | About 15% of price | Often about 6 months, can run higher | Tighter coverage and credit asks |
| Purchase above $1,500,000 | 20%-25% of price | About 9 months PITIA | Larger balance, larger reserves |
| Rate-and-term refinance, modest leverage | No purchase-style down payment | Can be waived under $1,500,000 | Payoff, costs |
| Cash-out refinance, standard rental | Equity stays in property; max 75% LTV | Often steps up | Seasoning, about 6 months |
Notice what the high-leverage row does. A smaller down payment usually comes with tighter credit and coverage asks, and those can push reserves up. The cash burden shifts. It does not vanish.
When Is Each Dollar Due?
Cash does not leave your account all at once. It moves in stages.
| Stage | What you fund | Source of funds matters? |
|---|---|---|
| Contract | Earnest money | Yes, it gets traced |
| Application and appraisal | Appraisal and third-party fees | Usually |
| Before closing | Balance of down payment, costs, prepaids | Yes |
| After closing | Reserves remain in the account | Yes, and they must stay |
The account that wires the money must still hold the reserve balance afterward. Draining a reserve account to cover the wire is one of the most common reasons a file stalls.
What Counts as Cash, and What Doesn’t
The lender wants documented, traceable money. Expect the most recent account statements, all pages, commonly two consecutive months. Large or unusual deposits draw a request for a paper trail: a letter of explanation, a sale document or a gift letter.
How different assets are treated:
- Checking and savings: the cleanest. They count in full once documented.
- Brokerage and retirement accounts: generally allowed, but usually at a discount to the balance.
- Cryptocurrency: most programs will not count it toward reserves.
- Gift funds: where a program allows gifts, they typically cover the down payment and costs, not reserves. Many programs also require you to put in a minimum of your own funds.
- Borrowed funds: most programs do not allow a second lien at closing to fund your down payment.
- Cash-out proceeds from another property: some programs allow them to fund the next purchase. Check seasoning on the property you are pulling from. Lendmire’s piece How Much Equity a Rental Needs Before a DSCR Cash-Out Pays Off covers that math.
Move money early. Funds that sit in your account season naturally. A big transfer days before closing is the usual cause of a delayed file.
Where the General Rule Breaks
Every rule above has an edge case. These are the ones that change the number.
Coverage below 1.00. A 1.00 coverage ratio is where many select programs start. A separate path, available through select lenders in the network, takes coverage below 1.00, with leverage and terms adjusted. Expect lower maximum leverage, which means a bigger down payment, and often heavier reserves.
No-ratio structures. These are available only through select lenders, generally for borrowers who already own a primary residence. They trade the rent test for other strengths in the file.
Expensive markets. In high-priced areas, rents often cannot cover the payment at 75%-80% LTV. A DSCR is rent over payment, as the standard definition of the ratio shows, with net operating income over debt service. When the number falls short, the practical fix is more down payment. Coverage, not just the LTV cap, can set your real cash need.
Short-term rentals. For an Airbnb-style property, purchase leverage tops out at 75% LTV. Refinances run around 70%, and a cash-out tops out at 70% on short-term-rental collateral versus 75% on a standard rental. Expect a 640+ score and about 12 months of hosting history. The coverage floor is 1.00 on purchases and refinances. 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. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Larger loans. Reserves rise with balance. Above $2,500,000 the network generally holds to 30-year fixed structures. Standard programs run up to $3,000,000.
Ineligible properties. Manufactured homes (single- and double-wide), log homes and barndominiums are not offered in the network’s DSCR programs. Do not budget cash for them.
Zero down. It does not exist in this market. The equity cushion is the lender’s protection.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and 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.
Common Misconceptions
- “A DSCR loan checks nothing about my finances.” The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your assets, source of funds and reserves are still verified.
- “Down payment equals cash to close.” Cash to close adds costs and prepaids and subtracts credits. Reserves sit on top of both.
- “Clearing 1.00 means the property cash flows.” It does not. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities and capital expenses sit outside it.
- “A strong DSCR means a small down payment.” The program matrix sets leverage. Coverage alone does not.
A Pre-Offer Cash Worksheet
Work in this order before you tour a single property.
1. List every account you can document, and what each would count for.
2. Pick a price range, then apply the leverage tier your credit supports.
3. Add costs and prepaids, then subtract any credits you can realistically negotiate.
4. Set aside reserves for this property, and for each property you already finance.
5. Add a buffer for a low appraisal or a repair request.
6. If your total comes up short, work backward from your cash to the highest price that still leaves reserves intact.
That reverse step is the one most budgets skip. Start from what you have, not what you want to buy.
For a full picture of how the loan itself works, read Lendmire’s complete DSCR loans guide.
Key Terms Defined
DSCR (debt service coverage ratio): the property’s monthly rent divided by its full monthly payment, used to test whether the rent supports the loan.
LTV (loan-to-value): the loan amount as a share of the property’s price or value. A 75% LTV means you put 25% down. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
PITIA: principal, interest, taxes, insurance and association dues, the full monthly obligation on the property.
Reserves: liquid funds you must still hold after closing, measured in months of PITIA.
Prepaids: taxes, insurance and interest paid up front at closing, and initial escrow deposits.
Seasoning: the time funds or a property must sit in your name before a lender counts them.
Frequently Asked Questions
Can I use gift funds for a DSCR loan?
Sometimes. Where a program allows gifts, they typically cover the down payment and closing costs, not reserves. Many programs also want you to contribute a minimum of your own money.
Do reserves count as part of my down payment?
No. Reserves are what remains after closing. If your balance after the wire is below the requirement, the file is short even when the down payment is covered.
Do closing costs lower my DSCR?
No. They do not enter the ratio. They raise your cash to close, and if rolled into the loan they raise the loan amount and LTV.
Can I buy a rental with nothing down?
Not through a DSCR program. The equity cushion is what protects the lender. A seller credit or cash-out proceeds from another property can reduce what you bring from savings, but the equity still has to exist.
How many months of reserves will I need?
Commonly about 6 months of PITIA, with about 9 months on loans above $1,500,000. Conservative rate-and-term refinances at modest leverage under $1,500,000 can see reserves waived. Reserves vary by lender, leverage, loan size and transaction type.
Sizing Your Number
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage and investor goals. As a mortgage broker, Lendmire arranges these loans through select lenders in its wholesale network, covering 41 markets, including Washington, D.C. Qualification is subject to lender guidelines, and nothing here is a commitment to lend. You can request a quote or call 828-256-2183.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage brokerage specializing in DSCR investor loans, helping arrange financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. The model centers on property-level rental income reviewed by the lender rather than W-2 documentation, subject to lender guidelines, suiting entity-owned and multi-property investors. Lendmire holds Scotsman Guide Top Mortgage Workplace recognition for 2025 and 2026.
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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. CFPB Loan Estimate Explainer
2. CFPB Sample Closing Disclosure
3. Wikipedia, Debt service coverage ratio
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Qualify for a DSCR Loan on a Month-to-Month Rental · How to Get a DSCR Cash-Out Loan From Application to Closing · DSCR Loan vs Hard Money for a Rural Rental That Needs Work
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.