Colorado DSCR Loans for STR Financing

Frequently Asked Questions

What is a DSCR loan and how does it work for Colorado real estate investors?

A DSCR loan (Debt Service Coverage Ratio loan) is designed for real estate investors who want to qualify for financing based on the income a property generates, rather than personal financial details like W-2s or tax returns. Approval is based on whether the property’s income covers the debt service, including principal, interest, taxes, and insurance. This makes it an excellent option for investors with multiple properties or seasonal income. In Colorado, DSCR loans work well in cities like Denver and Colorado Springs, as well as vacation hotspots like Breckenridge, where STRs produce strong, predictable cash flow.

How is DSCR calculated in a typical loan scenario?

Colorado lenders calculate DSCR by dividing the property's net operating income (NOI) by its total annual debt service. For example, if a property in Colorado earns $110,000 annually and its debt service is $88,000, the DSCR is 1.25—showing a strong margin between income and loan obligations. A 1.00 DSCR is often the minimum for approval in Colorado, but higher ratios offer better rates and terms. Whether you're targeting STRs in Breckenridge or long-term rentals in Denver or Colorado Springs, knowing your DSCR is key. It helps Colorado investors identify high-performing assets and secure scalable financing.

What is considered a good DSCR ratio for Colorado investors when applying for financing?

In Colorado, a good DSCR ratio is usually 1.20 or above. While 1.00 is the minimum most lenders will accept, higher ratios show the property is financially stable. A DSCR of 1.20 means the income exceeds debt by 20%, which can help you qualify for better loan terms. In competitive Colorado markets like Denver, Boulder, and Colorado Springs, a higher DSCR makes your deal more attractive to lenders. Understanding what’s considered a good DSCR in Colorado helps you analyze rental properties and reduce financing friction.

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?

Colorado lenders evaluating DSCR loans prioritize the property’s rental income over the borrower’s personal income. In Colorado, documentation such as leases, STR income summaries, or rent projections is used to establish income. That income is then compared to the property's debt obligations to calculate the DSCR. If the property generates enough income to meet the lender’s DSCR requirement—typically 1.00 or higher—Colorado investors may qualify with minimal documentation. This makes DSCR loans in Colorado appealing for self-employed buyers and STR investors. Understanding rental income evaluation in Colorado is vital for anyone financing asset-based deals.

What’s the minimum debt service coverage ratio required for approval?

In Colorado, lenders usually require a minimum DSCR of 1.00 to approve a DSCR loan. Some Colorado lenders may allow ratios down to 0.75, but these approvals are rare and typically come with higher reserve or equity requirements. A DSCR of 1.20 or greater is preferred in Colorado’s high-demand markets like Denver, Boulder, or Fort Collins. DSCR loans in Colorado appeal to investors who want to qualify based on asset income rather than personal financials. Understanding how Colorado lenders assess DSCR minimums is essential for securing competitive loan terms. Colorado investors who target properties exceeding the minimum ratio are more likely to succeed with fast, favorable financing.

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. DSCR loans in Colorado let borrowers qualify based on how much income a property produces—not their personal earnings. In cities like Denver or Boulder, Colorado investors use this strategy to grow portfolios quickly without getting held up by tax documentation. DSCR financing is a strong fit for Colorado’s STR and long-term rental markets.

Expanding your rental portfolio beyond Colorado? We also offer financing in Utah and New Mexico , making it easy to scale across the Mountain West with the same asset-based approval process.