DSCR Direct

One of the most common questions I get is whether a 620 credit score is actually good enough to get a DSCR loan - or if you're just going to get quoted something so ugly it doesn't make financial sense. The answer depends on the full picture, not just the FICO. This case study walks through a real scenario I worked on where a 620-FICO borrower closed a cash-flowing rental, and I'll show you exactly what the numbers looked like.

The Borrower's Situation

The borrower was a first-time real estate investor in his early 30s. He'd been saving aggressively but had a credit score dinged by some old medical collections and a late car payment two years prior. His FICO sat at 620 - right at the minimum for most DSCR programs. He had $85,000 in liquid savings and a W-2 job, but he didn't want to use a conventional loan because he'd just started a side business and his DTI looked rough on paper. He found a single-family rental in Memphis listed at $250,000.

The Deal Structure

We structured the purchase at 75% LTV, meaning a $187,500 loan amount and $62,500 down payment. The property appraised at $250,000 with a market rent of $1,850/month. Taxes were $2,400/year, insurance $1,600/year, and there was no HOA. We went with a 3-year prepayment penalty to bring the rate down as much as possible. The lender required 6 months of PITIA reserves, which came out to roughly $9,600 set aside in a bank account at closing.

The Rate and Monthly Payment

At 600 FICO, 75% LTV, with a 3-year prepay, the rate came in at 7.625%. That's not a typo - mid-to-high 7s is realistic at this credit tier in 2026. The monthly principal and interest payment was $1,343. Add in taxes ($200/month), insurance ($133/month), and the full PITIA was $1,676/month. With market rent at $1,850, that gave us a DSCR of 1.10 - not stellar, but comfortably above 1.0. After a conservative 5% vacancy reserve and basic maintenance budget, the property still netted about $100/month in true cash flow.

What the Same Deal Looks Like at 700 and 740 FICO

Here's where it gets interesting. The same deal at a 700 FICO would have priced around 6.875% - saving roughly $95/month on the payment and bumping the DSCR to 1.18. At 740 FICO, the rate drops to approximately 6.25%, the payment falls to $1,154 P&I, and the DSCR jumps to 1.27. That's an extra $189/month in cash flow compared to the 620 scenario. The improvement path is real and significant. If this borrower spends a year cleaning up his credit, his refinance options open up dramatically.

How Reserves Were Structured

Reserves are one of the sticking points at lower FICO scores because lenders want to see more cushion. This lender required 6 months of PITIA, which meant $10,056 sitting in a checking or savings account at closing. The borrower's total cash to close was $62,500 (down payment) + approximately $6,200 (closing costs) + $10,056 (reserves) = roughly $78,756. That left him about $6,200 in additional liquidity after closing. Tight, but it worked. Some lenders at this FICO tier require 9 or even 12 months of reserves, so shopping multiple lenders was critical.

Why This Deal Still Made Sense

A 7.625% rate sounds painful, and compared to a conventional owner-occupied loan it is. But this borrower had no other path to an investment property mortgage - conventional underwriting would have denied him based on DTI alone. He's cash flowing from day one, building equity, and has a clear refinance runway once his credit improves. In 12-18 months, if he gets his FICO to 700+, a rate-and-term refi drops his payment substantially. The property is appreciating in a strong Memphis submarket, and the rent has room to grow.

Key Takeaways

A 600 FICO DSCR loan is absolutely doable, and the borrower here is proof. The rate premium is real - expect to pay 1-1.5% more than a 740+ borrower on the same deal. But the alternative for many investors at this credit level is doing nothing, and doing nothing doesn't build wealth. Structure the deal conservatively (75% LTV, reasonable reserves), pick a market with strong rent-to-price ratios, and plan your credit improvement strategy for a refinance in 12-18 months.