As a broker, few things are more frustrating than a deal falling apart late in the process. DSCR loans offer a streamlined path to closing for real estate investors, but certain issues can derail even promising scenarios. Knowing what to watch for, and how to address it early, can save you time, protect your client relationships and help you close more deals.
1. Unrealistic Property Values
Inflated property values are one of the more common issues that can stall a deal. If the appraisal comes back lower than expected, it can affect the loan-to-value ratio and change the terms of the deal or disqualify it altogether.
How to avoid it: Use tools like Zillow, Redfin, and realtor.com to review recent comparables and active listings before submitting. Getting a realistic picture of a property’s market value early helps prevent surprises at appraisal. Your Visio account executive can also help you evaluate property values in a specific market before formal submission.
2. Credit Score Falls Below the Minimum
While DSCR loans focus on property income rather than personal earnings, borrowers still need to meet a minimum credit score. At Visio, the threshold is 680. Deals submitted with borrowers below this threshold will be declined early in the process.
How to avoid it: Verify your borrower’s credit score before starting the application. If they’re close but not quite there, it may be worth a brief delay to address any quick credit improvements rather than submitting a deal that won’t clear underwriting.
3. Incomplete or Inaccurate Documentation
DSCR loans require less documentation than conventional mortgages, but what’s required still matters. Missing appraisal details, incorrect property information, or incomplete entity documentation can slow a deal significantly or cause it to stall.
How to avoid it: Confirm the property type and intended use with your borrower early in the conversation. If the borrower plans to live in the property, a DSCR loan isn’t the right fit. Make sure the property will function strictly as a short-term rental or long-term rental before proceeding.
4. Property Type or Occupancy Issues
DSCR loans are designed for non-owner-occupied residential investment properties, typically 1-4 units. Deals involving owner-occupied properties, commercial-use buildings or properties that don’t meet lender guidelines will be flagged during underwriting.
How to avoid it: Don’t wait to ask the borrower about the property type and intended use. If the borrower plans to live in the property, a DSCR loan isn’t the right fit. Make sure the property will function strictly as a short-term rental or long-term rental before proceeding.
5. Unrealistic Rental Income Projections
Overestimating a property’s rental income is a subtle but common issue, especially with short-term rental properties where income can fluctuate seasonally. If the appraisal comes back with a lower market rent than the borrower expected, the DSCR drops and the deal may no longer qualify at the original terms.
How to avoid it: Encourage your borrowers to use conservative income estimates backed by comparable rental data. For short-term rentals, factor in seasonality and realistic occupancy rates rather than peak-season projections. If you’re unsure about market rents in a specific area, Visio’s loan officers can help you evaluate the deal before formal submission.
Build a Smoother Pipeline with Visio
The best brokers aren’t the ones who never encounter deal challenges. They’re the ones who catch issues early and know how to navigate them. Visio Lending’s Broker Portal has dedicated account executives and transparent pricing to help brokers know what works and what doesn’t. Partner with Visio to give your clients access to the nation’s leading DSCR lender while maximizing your earning potential with compensation up to 5%.
