DSCR loans by state

DSCR Loans in Texas

Texas leads the nation in domestic migration, adding 400,000+ residents annually. Dallas-Fort Worth is one of the fastest-growing metros globally, attracting corporate relocations (Toyota, Caterpillar, Goldman Sachs). Houston is the energy capital with a massive healthcare sector (Texas Medical Center). San Antonio offers the most affordable major-metro pricing. Austin has a premium tech market.

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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.

Texas Property Taxes & DSCR Impact

Texas has one of the highest effective property tax rates in the nation at approximately 1.74%. Some counties exceed 2.5%. With no income tax, property taxes are the primary revenue source. Recent legislative reforms have provided some property tax relief through increased homestead exemptions, but investment properties do not benefit from these.

No income tax helps, but property taxes of 1.74%+ are the defining DSCR challenge in Texas. On a $300,000 property, taxes are ~$5,220/year ($435/month). Combined with above-average insurance, the expense load is heavy. Investors succeed by targeting markets where rents overcome this burden — San Antonio and DFW suburbs tend to produce the best DSCR outcomes.

Texas Landlord-Tenant Laws

Texas is very landlord-friendly. No rent control exists (preempted by state law). Eviction for nonpayment requires only a 3-day notice to vacate, and the Justice of the Peace court process typically completes in 3–4 weeks. Texas landlord-tenant law strongly favors property owners.

Texas Income Tax for Investors

Texas has no state income tax. The Texas Constitution prohibits a state income tax unless approved by voters. This is a major advantage for rental investors, offsetting the high property tax burden.

Insurance Costs in Texas

Insurance costs are above average at $2,000–$4,000 per year. Texas faces multiple natural disaster risks: hurricanes along the Gulf Coast (Houston, Corpus Christi), tornadoes in North Texas (Dallas-Fort Worth), hail damage statewide, and flooding in many low-lying areas. Houston flooding (Hurricane Harvey, 2017) was particularly devastating.

Top Investor Markets in Texas

•Dallas-Fort Worth
•Houston
•San Antonio
•Austin
•El Paso

Licensing Requirements

Texas requires mortgage brokers and lenders to be licensed through the Texas Department of Savings and Mortgage Lending.

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