DSCR Loan Alabama
- LTV: 80.00%
- Term: 30 Year
- Rate: 7.375%
- Points: 1.5%
What are DSCR Loans used for in Alabama?
1. Mobile
2. Montgomery
3. Birmingham
What are dscr loans used for in AlabamA?
DSCR loans are a powerful financing tool for real estate investors in Alabama, allowing them to qualify for loans based on the rental income potential of the property rather than personal income.
These loans use the Debt Service Coverage Ratio (DSCR)—a calculation comparing rental income to property expenses to determine eligibility and loan amounts.
In Alabama, where rental demand is strong, DSCR loans are commonly used to finance long-term rental properties, short-term vacation rentals, and multi-unit buildings.
For those following the BRRRR investing strategy, DSCR loans are ideal for refinancing after stabilizing a property. This strategy allows investors to build a portfolio of rental properties while preserving capital for future projects.
If you're considering investing in Airbnb rentals, DSCR loans can also help finance short-term rentals in Alabama’s high-demand vacation and business rental markets. Learn more in our guide: Financing Airbnb Rentals with DSCR Loans.
To understand how to calculate DSCR and determine your eligibility, visit the How to Calculate DSCR section of this page.
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DSCR loans are a powerful financing tool for real estate investors in Alabama, allowing them to qualify for loans based on the rental income potential of the property rather than personal income.
These loans use the Debt Service Coverage Ratio (DSCR)—a calculation comparing rental income to property expenses to determine eligibility and loan amounts.
In Alabama, where rental demand is strong, DSCR loans are commonly used to finance long-term rental properties, short-term vacation rentals, and multi-unit buildings.
For those following the BRRRR investing strategy, DSCR loans are ideal for refinancing after stabilizing a property. This strategy allows investors to build a portfolio of rental properties while preserving capital for future projects.
If you're considering investing in Airbnb rentals, DSCR loans can also help finance short-term rentals in Alabama’s high-demand vacation and business rental markets. Learn more in our guide: Financing Airbnb Rentals with DSCR Loans.
To understand how to calculate DSCR and determine your eligibility, visit the How to Calculate DSCR section of this page.
Alabama DSCR Loan Products
Low Rates, from 1.0% Origination for long term & short term rentals in Alabama.
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Long Term Rental
DCSR Loans Alabama
Rates from 6.75%
LTV Up To 80%
From 1.0% Origination Points
Minimum DSCR: 1.0
Closing Time 14 Days
Appraisal Required
Minimum Credit Score: 660
Property Condition C4 Required
Purchase, Refinance, and Cash Out Available
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Short Term Rental
DCSR Loans Alabama
Rates from 6.95%
LTV Up To 80%
1-2% Origination Points
Minimum DSCR: 1.0
Closing Time 21 Days
Appraisal Required & AirDNA Check
Minimum Credit Score: 680
Property Condition C4 Required
Purchase, Refinance, Cash Out Available
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How To Determine DSCR For Alabama Rental Properties?
The Debt Service Coverage Ratio (DSCR) is calculated by dividing the monthly rent of the property by the monthly loan payment (principal + Interest), taxes, insurance and association fees (PITIA).
DSCR = Rent/PITIA
The basis of a DSCR loan in Alabama, is that the rent you collect from tenants leasing the property should be greater than the cost to own and operate the property.
Investment purpose rental properties with a DSCR greater than 1.0 are called “cash flowing”. You can calculate the DSCR of your rental property with our DSCR Loan Calculator.
(DSCR Evaluation)
Property Value: $174,000
Loan: $139,500
Interest Rate: 7.25%
Ammortization: 30 YR (FRM)
Monthly Rent: $1,595
P&I Payment: $951.64
Monthly Taxes: $125.00
Monthly Insurance: $95
Monthly HOA: $0
DSCR 1.36
Alabama DScr Loan process
Ridge Street closes Alabama DSCR loans in 14-21 days.
Apply Or Get Pre-Approved Online
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Receive your term sheet
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Submit Docs
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Appraisal or BPO
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Closing
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When To Use a DSCR Loan?
DSCR loans are used by investors to "hold" real estate. These loans are long term and amortizing. This allows investors to continuously gain equity in their property while generating monthly cashflow.
Investors either use DSCR loans when purchasing a property or when refinancing it. The BRRRR Investing Strategy is popular among investors in which the DSCR loan is used to "cash out" the property.
Benefits Of DSCR LoanS Compared To Other Loan Types
Other benefits of DSCR loans include:
- No income verification
- Can be used for long term and short term rentals (Financing Airbnb's for example)
- Cost Effective
Best Rental Markets In Alabama For DSCR Loans
Alabama's rental property market offers affordable housing prices and strong rental demand in cities like Birmingham, Huntsville, Montgomery, and Mobile. Huntsville’s growing tech sector and Birmingham’s healthcare industry drive consistent tenant demand. College towns such as Tuscaloosa and Auburn provide steady rental income potential due to student populations. Investors should focus on suburban areas with low crime rates and stable job markets to reduce risk. Alabama’s low property taxes further improve cash flow potential, making DSCR loans an effective financing option for rental investments in the state.
Mobile, AL
Mobile, Alabama offers strong investment opportunities for rental properties using DSCR loans, particularly in Midtown, Spring Hill, and Old Dauphin Way, where rental demand is steady. Avoid areas with high flood risks or declining property values. Multifamily properties near the University of South Alabama provide consistent cash flow from student renters. Properties near Mobile Bay and downtown are good for short-term rentals, attracting tourists, but careful selection is necessary to ensure reliable occupancy and compliance with local regulations.
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Birmingham, AL
Birmingham, Alabama offers solid potential for rental properties using DSCR loans, particularly in neighborhoods like Avondale, Crestwood, and Southside, where rental demand remains stable. Be cautious of areas with economic downturns or higher crime rates. Multifamily properties near the University of Alabama at Birmingham (UAB) provide consistent rental income from students and medical professionals. Downtown and Five Points South also offer opportunities for short-term rentals, attracting tourists and business travelers. However, careful property selection is essential to ensure reliable occupancy and compliance with local regulations.
Montgomery, AL
Montgomery, Alabama is a growing market for rental properties using DSCR loans. Neighborhoods such as Old Cloverdale, Dalraida, and East Montgomery provide consistent rental demand. Investors should avoid areas with declining property values or higher crime rates, as these can affect both tenant stability and long-term profitability. For steady cash flow, multifamily properties near Alabama State University are a strong choice, given the reliable student population. Short-term rental opportunities are also abundant near downtown and the Alabama River, appealing to both tourists and business visitors. Selecting the right property in these areas ensures both steady occupancy and regulatory compliance.
Alabama DSCR Loan FAQ’s
How can I Improve the DSCR of my property?
- Increase Your Down Payment. By Increasing your down payment your loan amount will go down and your DSCR will increase. If you’re struggling to improve your DSCR past 1.0, increasing your down payment is an option you may have to consider.
- Ask Your Lender About A Rate Buy Down. Some lenders, including Ridge Street, allow you to pay an additional fee at closing in exchange for a lower rate. In some cases, a rate buydown will allow you lower your DSCR without increasing your overall cash required to close.
- Push For Less Expensive Insurance. Ask your insurance broker if there is anything they can do to lower your policy fee. A lower insurance policy fee will increase your DSCR.
Could I use a DSCR loan if I have to renovate a property?
You can start by getting a short term fix and flip loan to renovate the property and then refinance the property with a DSCR loan. The strategy of buy, rehab, rent, refinance, and repeating is called The BRRRR Strategy.
Can I use a DSCR loan on a Vacation property?
Absolutely! This is one of the main use cases for a DSCR loan.
What loan amounts can I get for a DSCR loan?
Between $50K and $2M. As long as a the DSCR is greater than 1.0, Ridge Street will lend on it.
Are DSCR loans only for investment properties?
Yes. If you are buying a piece of real estate which you intend to live in, then you would not qualify for a DSCR loan.
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How to Get A DSCR Loan In Alabama with Ridge Street?
Ridge Street is the #1 DSCR Rental Property Lender in Alabama. We pride ourselves on fast closings and fairly priced loans. Get approved for your next project today.
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