DSCR Loans: A Smart Option for Real Estate Investors in Northern California

A DSCR loan measures whether a property’s rental income can cover its housing expenses. Lenders calculate the ratio by dividing net operating income by the total monthly housing cost (principal, interest, taxes, insurance, and association dues if applicable).

A DSCR of 1.0 or higher indicates the property generates enough income to pay the expenses.

Documentation often centers on leases, market rent estimates, and the appraisal’s income schedule, which can streamline qualifying for investors with complex personal tax returns.

Since DSCR programs are for investment properties, down payments are usually higher than for owner-occupied homes.

Many programs call for 20 to 25 percent down. The exact requirement can vary with credit profile, property type, and the strength of the DSCR. Stronger cash flow may support more favorable terms, while small multifamily or short-term rentals can require more capital.

An advisor can help you align down payment, reserves, and DSCR to meet program guidelines.

Both DSCR and conventional loans require an appraisal, credit review, and standard closing processes, but they evaluate income differently.

• Qualification focus: DSCR emphasizes the property’s cash flow, while conventional financing weighs the borrower’s income and debt-to-income ratio.
• Documentation: DSCR relies on leases and market rent analysis. Conventional loans rely more on W-2s or tax returns in addition to rental income treatment.
• Occupancy options: DSCR is for investment properties. Conventional financing can be used for primary residences, second homes, and investment properties.
• Reserves and terms: Investment loans of any kind may require liquid reserves. DSCR programs can have different reserve requirements and may allow features like interest-only periods.
• Who it tends to fit: DSCR can suit investors scaling portfolios where property income is the priority. Conventional loans can suit investors whose personal income comfortably supports new debt alongside existing obligations.

Rental demand in Redding, Red Bluff, and greater Shasta County continues to draw investors seeking long-term cash flow.

DSCR financing can support single-family rentals, small multifamily properties, and certain short-term rentals where permitted.

Nearby markets in Tehama and Butte counties also offer opportunities for investors who want to diversify holdings or 1031 exchange into income-producing assets.

A DSCR loan is one of several ways to finance rentals.

At US Lending Company, we offer a full suite of options so you can compare side by side, including conventional loans, FHA loans, VA loans, and refinance options.

We can review DSCR requirements, down payment strategies, and reserve planning to help you build a durable financing plan.

Ready to explore DSCR financing for an investment in Redding or anywhere in California? Our team can help you evaluate cash flow, estimate DSCR, and compare programs. Contact us to discuss your next purchase or refinance.

Looking for more resources? Explore our blog or meet our loan officers for personalized advice.