DSCR loans by state

DSCR Loans in Hawaii

Hawaii's limited land and strict zoning create persistent housing scarcity that supports high rents. Military installations (Pearl Harbor, Schofield Barracks) drive significant long-term rental demand on Oahu. Tourism supports short-term rental income, though increasing STR regulations have restricted this strategy on Oahu and Maui.

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What is a DSCR loan?

A Debt Service Coverage Ratio (DSCR) loan is a type of investment property mortgage where the borrower qualifies based on the property's rental income rather than personal income. Lenders calculate the DSCR by dividing the property's gross rental income by the total debt obligation (principal, interest, taxes, insurance, and HOA). A ratio of 1.0 means the property breaks even; most lenders require a DSCR of 1.0–1.25 to approve the loan.

Because DSCR loans do not require W-2s, tax returns, or employment verification, they are popular among self-employed investors, LLC-based portfolios, and foreign nationals. Typical terms include 30-year fixed or adjustable rates, 75–80% LTV, and minimum credit scores of 660–700. State-level factors like property taxes, insurance requirements, and landlord-tenant laws directly affect the DSCR calculation and vary significantly across markets.

Hawaii Property Taxes & DSCR Impact

Hawaii has the lowest effective property tax rate in the U.S. at approximately 0.28%. However, with median home prices exceeding $700,000 statewide, the absolute dollar amount of taxes is still meaningful. Non-owner-occupied properties are taxed at higher rates in most counties.

Despite the nation's lowest property tax rate, Hawaii's extremely high purchase prices create massive monthly debt service. A $800,000 property at 7.5% on a DSCR loan means ~$5,600/month in principal and interest alone. Combined with hurricane insurance and high income taxes, achieving 1.0+ DSCR requires premium rents or creative STR strategies.

Hawaii Landlord-Tenant Laws

Hawaii is tenant-friendly. The state requires 45 days' notice for rent increases on month-to-month tenancies. Eviction for nonpayment requires a 5-day notice, but judicial eviction processing can take 4–8 weeks. Honolulu has additional tenant protection ordinances.

Hawaii Income Tax for Investors

Hawaii has the highest state income tax rate in the U.S. (aside from California) with a top marginal rate of 11% on income over $200,000. Rental income is fully subject to state tax, which significantly reduces net investor returns.

Insurance Costs in Hawaii

Hurricane insurance is required by most lenders and is expensive at $2,500–$6,000+ per year. Volcanic hazard zones on the Big Island have even more limited and expensive coverage options. Flood insurance is required in many coastal areas.

Top Investor Markets in Hawaii

•Honolulu
•Kailua-Kona
•Kahului (Maui)
•Hilo

Licensing Requirements

Hawaii requires mortgage loan originators and mortgage servicers to be licensed through the Hawaii Division of Financial Institutions.

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