No Ratio Loans: When Even DSCR Will Not Work
Not every good investment property covers its payment on paper. No ratio lending qualifies on equity and credit instead.
DSCR lending solved most investor problems, but it created a new one: properties that are excellent investments and poor coverage ratios. High-value homes in low-yield neighborhoods, seasonal rentals, and properties being repositioned all struggle against a rent test. No ratio programs exist for exactly those files.
What no ratio means
Two calculations are skipped. There is no debt-to-income ratio, because no personal income is used. And there is no debt service coverage ratio, because rent is not compared to the payment. The underwriter evaluates the collateral, your credit, and your liquidity.
Typical terms
Expect 25% to 35% down, credit in the 700s for the best pricing, and six to twelve months of reserves. Rates run modestly above a comparable DSCR loan, and prepayment penalties are standard on business-purpose transactions.
Good use cases
A vacant property you are about to renovate. A seasonal vacation rental with uneven income. A property where the existing lease is far below market and you do not want that lease defining your ratio. A purchase closing before any tenant is in place.
It is also a clean solution for a borrower who simply does not want their personal finances examined at all.
Choosing between DSCR and no ratio
If the property covers its payment, DSCR almost always prices better. Run the ratio first. Move to no ratio when the number lands below what the DSCR lender will accept, or when the rent picture is too complicated to document cleanly.
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