A Debt Service Coverage Ratio (DSCR) loan is a type of non-QM mortgage that qualifies borrowers based on property rental income rather than W-2s, tax returns, or employment verification.
Formula:
[ DSCR = \frac{Rental\ Income}{PITIA} ]
- PITIA: Principal, Interest, Taxes, Insurance, HOA
- Canyon Light Capital minimum DSCR: 0.75
- Market standard DSCR: 1.0
Texas DSCR Loan Snapshot
- Minimum DSCR ratio: 0.75
- Credit score: 640+
- Maximum LTV: 85% (SFR purchase)
- Loan amounts: $75,000 – $6,000,000
- Eligible properties:
- Single-family rentals
- 2–4 unit multifamily
- Condos & townhomes
- Short-term rentals (Airbnb, Vrbo)
- Vacation rentals & condotels
- Modular homes
Why Texas Is a Strong DSCR Market
- No state income tax → higher net returns for investors
- High property taxes (1.6–2.5%) → compress DSCR ratios, making flexible thresholds critical
- Population growth: Texas leads the U.S. in net migration
- Corporate relocations: Tesla, Oracle, HPE, and others drive rental demand
- Military market: Joint Base San Antonio (JBSA) is the largest U.S. installation, producing stable BAH-backed rental demand
- STR demand: Fredericksburg, South Padre Island, Austin, and Hill Country are premier vacation rental markets
Example DSCR Calculation
- Property: $400,000 SFR in Plano
- Loan amount: $320,000 (80% LTV)
- Monthly PITIA: $2,779 (includes $700 property taxes)
- Market rent: $3,200
- DSCR: 1.15 → Qualifies comfortably
Pros and Cons of Texas DSCR Loans
Pros:
- No personal income documentation required
- Scale portfolios without DTI limits
- LLC vesting available
- STR and military market eligible
- Loan amounts up to $6M
Cons:
- Higher rates than conventional loans
- Investment properties only
- Larger down payments required
- Texas property taxes compress DSCR
- Austin STR restrictions limit non-owner-occupied rentals
Best Texas Markets for DSCR Loans
- Dallas-Fort Worth: Fastest-growing metro; strong suburban rental demand
- Houston: Energy-driven economy; strong foreign national investor base
- Austin: Tech hub; appreciation play with tighter cash flow
- San Antonio: Military-backed rental demand; affordable acquisitions
- Hill Country/Fredericksburg: Premier STR market with wine tourism
FAQs
- Can DSCR loans be used for STRs? Yes, with AirDNA or appraisal-based projections.
- Can foreign nationals qualify? Yes, foreign national DSCR programs are available.
- Can I close in an LLC? Yes, Canyon Light Capital allows LLC vesting.
- Do property taxes affect DSCR? Yes, Texas’s high property taxes reduce DSCR ratios.
Key Takeaway
Texas DSCR loans are uniquely powerful due to the state’s strong rental demand, no income tax, and diverse markets. With flexible DSCR thresholds, high LTV options, and eligibility across STRs, multifamily, and military rentals, Canyon Light Capital empowers investors to scale portfolios across Texas’s booming real estate landscape.
About Canyon Light Capital
Great legacies are built on strong foundations. At Canyon Light Capital, we are driven by a singular mission: to ensure that the doors to real estate wealth remain open. We don’t just fund loans; we fund futures. From first-time investors to veteran portfolio builders, we are committed to giving real estate entrepreneurs the access, leverage, and support they need to build enduring wealth through investment properties.