DSCR loans let Michigan real estate investors qualify based on what the property earns, not their personal tax returns. No employment verification. No income documents. Just the rental income.
DSCR stands for Debt Service Coverage Ratio. It measures whether a rental property's income covers its monthly mortgage payment. When the ratio is 1.0 or higher, the property pays for itself. That single number replaces the tax returns, W-2s, and employment verification that conventional lenders require.
DSCR lenders don't look at your personal income history. Approval is based entirely on the rental income the property generates compared to its monthly debt payment.
The formula is simple: Monthly Rent divided by Monthly PITI (principal, interest, taxes, insurance). A ratio of 1.0 means break-even. 1.25 or higher is considered a strong approval in most cases.
Because each loan is underwritten on the property itself, investors can add multiple properties to a portfolio without hitting the income-documentation wall that stops conventional financing.
*Sub-1.0 DSCR programs exist for investors with strong credit profiles and reserves. Not available with all wholesale lenders. Ask your Clear2 loan officer for details.
Michigan's rental market varies significantly by geography. Detroit Metro, suburban Oakland County, and northern Michigan STR destinations each offer different yield profiles and DSCR dynamics.
Detroit and its inner-ring suburbs, including Dearborn, Southfield, and Warren, continue to attract DSCR investors with lower acquisition costs and gross rental yields that often exceed 8 to 10%. The DSCR math frequently pencils at these price points.
Royal Oak, Ferndale, Clawson, and Hazel Park are seeing strong demand from long-term renters priced out of homeownership. Median rents in these markets range from $1,400 to $1,800 per month, supporting DSCR ratios on modestly priced acquisitions.
Traverse City, Petoskey, the Leelanau Peninsula, and the Upper Peninsula attract significant short-term rental demand. Many DSCR lenders now accept STR projected income at market rates, opening these markets to investors who carry the occupancy risk themselves.
Rate premium comparisons are general estimates and vary by lender, credit profile, and market conditions. Contact Clear2 for a current rate quote.
DSCR loans serve a wide range of investor profiles. Here are three common situations Clear2 handles in Michigan.
A Warren, MI investor owns their primary home and wants to purchase a duplex in Eastpointe as a long-term rental. Both sides are occupied at $975 per month each, totaling $1,950 gross rent. With a projected PITI of $1,480, the DSCR ratio is 1.32. No tax returns needed, and they close in 28 days.
A Detroit investor completes a rehab on a three-bedroom home in Hamtramck, now renting for $1,350 per month. They use a DSCR cash-out refinance at 75% LTV to pull equity and fund their next acquisition. No income documentation required. The rental income carries the loan.
A Traverse City STR operator purchases a cottage near Sleeping Bear Dunes. The property generates $42,000 in annual short-term rental income. Their lender uses a 1007 rent schedule showing fair market STR income to underwrite the DSCR ratio, qualifying without any personal income documentation.
As an independent mortgage broker, Clear2 Mortgage has access to dozens of DSCR lenders, not just one bank's program. That means we can match each investor to the lender whose guidelines, rate sheet, and reserve requirements fit their specific situation.
Whether you're buying your first rental property in Metro Detroit or refinancing a portfolio of six units in suburban Oakland County, our team shops the entire wholesale DSCR market on your behalf.
Clear2 is based in Troy, MI, and licensed throughout Michigan. Every client works directly with their loan officer from quote to close.
Angelo Essak specializes in investment property financing for Michigan real estate investors. He works directly with borrowers to identify the right DSCR lender from Clear2's wholesale network, structure the deal around the property's income, and close on timeline.
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What does DSCR stand for and how is it calculated?
DSCR stands for Debt Service Coverage Ratio. It is calculated by dividing the property's monthly gross rental income by the monthly PITI payment (principal, interest, taxes, and insurance). A ratio of 1.0 means the rent exactly covers the mortgage. A ratio above 1.0 means the property generates a surplus after the mortgage payment.
Can I use a DSCR loan to buy a short-term rental in Michigan?
Yes. Many DSCR lenders in Clear2's wholesale network accept short-term rental income, typically based on a 1007 appraisal rent schedule that estimates fair market STR rental rates. Markets like Traverse City, the Leelanau Peninsula, and the Upper Peninsula are common targets for this program.
What is the minimum credit score for a DSCR loan?
Most DSCR lenders require a 620 minimum credit score. Pricing improves significantly at 680 and above. Some lenders offer programs down to 600 for investors with strong reserves or lower LTV ratios. Clear2 shops multiple lenders to find the best pricing for your credit profile.
What happens if my DSCR ratio is below 1.0?
Some lenders offer sub-1.0 DSCR programs, also called "no-ratio" programs, for borrowers with strong credit (typically 700+) and substantial reserves. These programs accept that the property does not fully cover its own debt service but still do not require personal income documentation. Availability varies by lender.
Can I take title in an LLC with a DSCR loan?
Yes. LLC and other entity vesting is available through most DSCR lenders in Clear2's network. This is one of the primary reasons investors choose DSCR over conventional investment property financing, which generally requires personal title. Clear2 can structure the loan to fit your entity.
How does Clear2 as a broker benefit me on a DSCR loan?
As an independent mortgage broker, Clear2 submits your loan to multiple DSCR wholesale lenders simultaneously. Each lender has its own rate sheet, reserve requirements, and credit overlays. Shopping the wholesale market typically produces better pricing and more flexible guidelines than going directly to a bank or retail lender for investment property financing.
No tax returns, no employment docs. Just tell us about the property and we'll shop our wholesale lender network for the best DSCR rate available.
Clear2 Mortgage, LLC. NMLS #1911663. Licensed Mortgage Broker. 2600 W Big Beaver Rd, Suite 100, Troy, MI 48084. Equal Housing Lender. This is not a commitment to lend. All loans subject to credit approval, property appraisal, and underwriting guidelines. Rates and terms subject to change without notice.
