Alabama DSCR Loans for STR Financing
Grow Your Portfolio with DSCR Loans
Whether you're purchasing rentals in Birmingham, STRs in Gulf Shores, or long-term investments in Montgomery, our DSCR loans
provide the flexibility and competitive rates you need to expand your real estate portfolio in Alabama. These loans are ideal for investors who qualify based on property income rather than personal finances. We focus solely on the asset’s ability to cash flow and meet its debt service.
How to qualify
To obtain a quote, we will need the following information:
Property Value and
Purchase Price
Down Payment
Amount
Credit Score
Asset Types
- Single Family Homes
- Townhomes
- Condos
- 2 - 4 Units (Duplex, Triplex, Quadplex)
- Multi-Family: 5 - 8 Units
- Mixed-Use: 2 - 8 Units
- Multi-Family: 9+ Unit
Loan Terms
- Loan Sizes:
$100k up to $3.5 Million (Larger loan sizes available on a case by case basis)
- Purchase LTV:
Up to 85%
- Rate & Term Refinance LTV:
Up to 80%
- Cash Out Refinance LTV:
Up to 80%
- Amortization:
30 Year % 40 Year Amortization Options Available
- Term Lengths:
5/6 ARMs, 7/6 ARMs, 10 Year Interest Only, 30 Year Fixed & 40 Year Fixed
- Floor Rate:
5.50% (subject to change daily due to market volatility)
- Full Recourse
with personal guarantee required for all borrowers with majority ownership (typically 20%+ or 25%+ if closing in an Entity)
- DSCR Requirement: 1.00x or greater depending on loan size and property type. Sub-1.00x DSCR and NO DSCR options available.
- Vesting:
Lending to Individuals, LLCs, and Corporations. Trusts Allowable on a Case by Case Basis.
- Average Time to Close:
14 to 35 days
Wondering if you qualify for investment property financing in your area?
We offer lending services in all 50 states!
Frequently Asked Questions
What is a DSCR loan and how does it work for Alabama real estate investors?
A DSCR loan (Debt Service Coverage Ratio loan) is a type of real estate financing that qualifies borrowers based on a property's rental income instead of personal income, employment, or tax returns. Lenders calculate whether the property generates enough monthly income to cover its mortgage, taxes, and insurance. This asset-based approach is ideal for real estate investors who have strong-performing properties but non-traditional financial profiles. In Alabama, where investors are targeting markets like Birmingham, Montgomery, and Gulf Shores, DSCR loans allow easier access to funding for both STRs and long-term rental assets.
How is DSCR calculated in a typical loan scenario?
DSCR in Alabama is calculated by dividing the property's net operating income (NOI) by its total debt service. For example, if an Alabama rental property earns $90,000 in NOI and annual mortgage payments total $75,000, the DSCR would be 1.20. This shows that the property earns more than enough to cover the loan. Most Alabama lenders require a minimum DSCR of 1.00, but higher ratios are often needed for better rates or lower reserve requirements. Investors in Alabama use DSCR to evaluate property performance and assess loan potential. Whether you're financing in Birmingham, Montgomery, or the Gulf Coast, understanding DSCR helps you secure strong real estate investments across Alabama.
What is considered a good DSCR ratio for Alabama investors when applying for financing?
In Alabama, a good DSCR ratio typically begins at 1.20. While the minimum DSCR accepted by lenders is usually 1.00, a 1.20 ratio shows that the property generates more income than it needs to cover its debt. This added cushion improves loan approval chances and often leads to better interest rates. Alabama real estate investors targeting STRs or long-term rentals in cities like Birmingham or Mobile benefit from aiming for higher DSCRs to increase financing flexibility. Knowing what qualifies as a strong DSCR in Alabama helps you evaluate deals and reduce lending risk.
Can I qualify for a DSCR loan if my personal income is limited?
Yes, you can qualify for a DSCR loan even if your personal income is limited. DSCR loans, often referred to as Airbnb loans when used for short-term rental properties, are designed to approve borrowers based on the income the property generates—not personal W-2s, tax returns, or debt-to-income ratios. Lenders calculate the property's debt service coverage ratio to determine if the income is sufficient to support the loan. As long as the DSCR meets the required threshold—usually 1.00 or higher—you can often be approved regardless of personal income. This makes Airbnb loans ideal for self-employed investors, business owners, or anyone scaling a rental portfolio without relying on traditional underwriting standards.
How does a lender evaluate rental income when approving a DSCR loan?
Lenders in Alabama evaluate rental income for DSCR loans by examining the income generated by the property, not the borrower. In Alabama, this often includes reviewing long-term lease agreements, fair market rent assessments, or short-term rental histories to estimate consistent income. The DSCR is calculated by comparing the net operating income to annual loan costs. If the property produces enough income to meet the threshold—typically 1.00—Alabama lenders may approve the loan, regardless of your personal financials. This makes DSCR loans in Alabama an appealing choice for real estate investors. Alabama borrowers benefit from flexibility and property-based qualification criteria.
What’s the minimum debt service coverage ratio required for approval?
The minimum DSCR required to qualify for a loan in Alabama is typically 1.00, meaning the property must generate enough income to cover the loan’s annual debt service. Some Alabama lenders may go as low as 0.75 under special conditions, such as high credit scores or large down payments. However, a DSCR of 1.20 or higher is generally preferred in Alabama for better loan terms. Investors in cities like Birmingham, Montgomery, or Huntsville can benefit from higher ratios that signal strong cash flow. DSCR loans in Alabama are ideal for those with complex personal income situations. Understanding the DSCR minimum in Alabama allows investors to set realistic financing goals and improve their chances of quick approval and favorable loan terms.
Who should consider using a DSCR instead of a traditional loan?
These loans are perfect for self-employed individuals, LLCs, and investors managing multiple properties. In Alabama, DSCR loans help bypass traditional mortgage hurdles by qualifying borrowers through the property’s income. Whether you're investing in Birmingham or Huntsville, Alabama real estate investors can benefit from faster approvals, minimal documentation, and more scalable financing when choosing this asset-based model.
