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DSCR Loans Explained How Investors Qualify Without Proving Income

By January 19, 2026Texas Real Estate Pros

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Show Summary

In this conversation, Dylan Silver interviews Tracey Stillman, a seasoned mortgage lender with 35 years of experience. They discuss various aspects of mortgage lending, including DSCR loans, bridge loans, and the current trends in Texas real estate investing. Tracey shares insights on the importance of location, the evolution of loan products, and the challenges faced by investors in the current market. The conversation concludes with Tracey providing her contact information for those interested in mortgage services.

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    Investor Fuel Show Transcript:

    Tracey Stillman (00:00)
    Exactly. And DSCR, know, that’s ⁓ debt service coverage ratio. Everyone’s always like, what is it? What is it? I always have to look it up. Debt service coverage ratio. Basically, your mortgage payment to how much you can charge for rent. It’s a ratio. ⁓ Basically, that’s really what it boils down to. ⁓ the the investor itself who finances you has a specific ⁓ average they’re looking for. And it depends on the property and it depends, you know.

    location and every all of that. So but it’s a great loan.

    Dylan Silver (02:04)
    Hey folks, welcome back to the show. Today’s guest, Tracey Stillman has 35 years of experience in mortgage lending where she runs her own team. She’s active in Texas and 11 other states and she’s the senior mortgage lender at Mortgage Right. Tracey, welcome to the show.

    Tracey Stillman (02:22)
    Hello, Dylan. Nice to meet you virtually. ⁓ Nice to meet everyone that’s listening. ⁓ Yes, my name is Tracey Stillman. I’m with Mortgage Right. We are a retail mortgage bank out of Birmingham, Alabama. We do cover all 50 states minus New York because everyone knows what a pain in the ass it is to get licensed in New York State. no offense to anyone that’s a New Yorker. I’m actually born in New York, so I can say that.

    Dylan Silver (02:25)
    Nice to meet you. That’s right.

    Tracey Stillman (02:50)
    But yeah, every state were licensed in every other state. So and yes, I do cover 12 other states or 11 other states besides Texas. So yeah, nice.

    Dylan Silver (02:59)
    Where are you

    from in New York? I was born in New Jersey.

    Tracey Stillman (03:03)
    Yeah, I was born in Rochester. My parents went to Syracuse. ⁓ but I was, I, my parents raised me in Denver though. So I moved to Denver when I was four years old. So I really am a, I call myself a Denverite, but ⁓ my passport does say Rochester, New York, however.

    Dylan Silver (03:10)
    Okay.

    One of the interesting things about having these conversations like this is you end up like meeting somebody and you have all these ⁓ connections that you didn’t realize you had. I actually was on this show and I ended up speaking with an investor who somehow owned a gelato shop in my hometown. And this was so crazy. Like what are the possible chances?

    Tracey Stillman (03:38)
    Yes,

    the eight degrees of Kevin Bacon or whatever it is.

    Dylan Silver (03:43)
    Yeah, that’s exactly right. Talking about the lending space, Tracey, we were talking a little bit before hopping on here about some of the newer products that are available in the space, but then then also that really no two lenders are alike. So when we talk about something like, you know, DSCR, it does seem to be that there’s a lot more people that are looking at DSCR. But but also there’s multiple use cases for it, right? It’s not just for one type of buyer.

    Tracey Stillman (04:11)
    Exactly. And DSCR, know, that’s ⁓ debt service coverage ratio. Everyone’s always like, what is it? What is it? I always have to look it up. Debt service coverage ratio. Basically, your mortgage payment to how much you can charge for rent. It’s a ratio. ⁓ Basically, that’s really what it boils down to. ⁓ the the investor itself who finances you has a specific ⁓ average they’re looking for. And it depends on the property and it depends, you know.

    location and every all of that. So but it’s a great loan.

    DSCR is ⁓ I say for for anyone that’s just getting their feet wet in the investment property. ⁓ You know, obviously residential is what that’s used for. But ⁓ I’m sure there’s something commercial line too, but I don’t know that.

    Dylan Silver (04:54)
    When we

    talk about the use cases for DSR, the thing that I’ve heard most commonly is that for investors who have multiple properties that they’re using, basically their personal credit or it’s personally guaranteed, that they can’t then go off of a tax return to justify another

    property because they’re going to say, well, you’re already maxed out. You know, have no disposable income for this. So that’s where where DSCR comes into play. Are there any other scenarios aside from that where DSCR would be utilized?

    Tracey Stillman (05:28)
    Exactly.

    Mainly because someone can’t prove their income. I mean, that’s when I used DSCR. It didn’t used to be as competitive as a rate, but it really is very competitive now ⁓ versus an investment loan on the conventional side of things. It ⁓ used to be a point or more higher, but now it’s more maybe a half a percentage higher than what you’d get on an investment. ⁓

    regular rate. So, you know, it really has over the last, I would say, five years, kind of evolved on its own in a good way because it really is a lot of people that are investing are self-employed, right? I mean, they’re flipping houses or do that’s how they’re making their living. And it’s a good choice for those that I use it for people that I can’t prove income for ⁓ nine times out of

    Dylan Silver (07:19)
    Now, when folks are looking at, let’s say a single family as an investment, single family home duplex, triplex, quadplex, maybe they’re newer investors, and they’re trying to figure out how they get into this space, and they’re exploring the SCR. One of the things that I’ve heard, and I don’t know if this is true or not, I’d love to get your feedback is that it may actually be easier to look at a

    quadplex, for example, than it may be to look at a duplex or a single family home because now you’ve got four doors, four sources of cash flow versus one or two, even if the total loan amount is higher. Is that is that true?

    Tracey Stillman (07:58)
    Yeah, because honestly, it’s about how much, right? It’s a ratio between what the mortgage payment is versus what you can charge rent. So if you can get four rent payments, right? So it’s all about that ratio. And it really is about the property itself, to be quite honest with you. When it boils down to that, I’ve had people say, well, I want to buy a DSCR home in Allen or something like that. I’m like, well, Mike, you know, I don’t…

    if you’re in Dallas proper, Dallas proper, you’re probably going to have a better ratio for what you can get for rent, right? So you have location, location, location is very important also to a DSCR alum because it matters how much you can charge for rent versus the mortgage payment.

    Dylan Silver (08:42)
    And

    when we when we talk about qualifications for DSCR, I’m imagining it’s going to mirror on some level, what lenders would look at in traditional of course, it’s different, but you’re to look at credit, you’re going to look at disposable. Yeah.

    Tracey Stillman (08:57)
    reserves,

    right, six months reserves is the norm, right? So six months of a mortgage payment ⁓ would be your reserve that they’re looking for. They’re going to look for 700 above a 700 FICO. That’s where you’re going to get better pricing, right? For sure. ⁓ 20 % down, right? Got to have the down payment. And then you’ve got to have the reserves. So those are the, the one thing you don’t have to really worry about is the income portion.

    Dylan Silver (09:24)
    Now for folks who are looking at some level of rehab associated with this, ⁓ would that be a separate loan product that would then, you know, bridge into a DSCR? How would that?

    Tracey Stillman (09:38)
    Right. We have rehab loans too that are separate from a DSCR. ⁓ you can do a rehab investment loan, but there’s going to be a different qualification purpose for that loan. So the qualifications there are going to probably be, we’re going to look at your income for that. because you’re going off a rehab loan, got to have, it’s always risk versus return for an investor. So, and when I say investor, I’m talking about

    the bank. So risk versus return. it depends on the program. that like the risk versus return on a DSCR is very visible, right? Well, we can see how much we can charge for rent. Here’s what the mortgage payment is. But like on a rehab loan, it’s like, well, how much are they going to rehab? How much is going to be worth? All those things. So they’re going to look at it every situation differently as far as like a loan product goes.

    Dylan Silver (10:07)
    Yeah.

    I want to pivot a bit here and talk about bridge loans. I’ve heard bridge loans used in multiple different scenarios. The one that I’ve most commonly heard it used for is when you’re going from some type of shorter term like hard money construction loan fix and flip into something longer term. But then also I’ve heard for situations where an exit strategy isn’t panning out. Maybe you thought you were going to be able to flip this and sell it and it’s been sitting for five months and you’re realizing this is not good.

    Tracey Stillman (11:35)
    Right. Yes. So Bridge and Bridge Loan Trial are a little bit tougher here in Texas, just so you know, because we have the 50A rule, which everyone should know. And if you don’t know that, we can talk, that’s a whole other segment of things to talk about versus, you know, in Texas with equity. So that could be a whole segment itself. But anyway, as far as a Bridge Loan goes in general, it’s for someone who, let’s say they already are under contract on a new home.

    And they had a contract on their current house they were selling, but it fell through. This actually just happened to me last week. And I only say that because of it. She thought she was under contract ⁓ on the house she was selling. The guy walked. So therefore she was like, well, what do I do? I said, well, we can do a bridge loan or there’s lots of companies here in Texas that are called, they’re more like we buy the home from you kind of a thing. And I have three different companies that I use for that. ⁓

    And so I got her hooked up with that person, one of those choices, and it scared her because they’re giving her this much upfront. So bridge loans are, they’re all different, but in Texas, especially different. But basically it’s just you’re borrowing your equity upfront to buy the next house. And then you’re gonna pay it back once the other house sells. So that’s basically what a bridge loan is. And normally a bridge loan is not gonna last more than.

    you hope 90 days, no more than 180, then they start dinging you. So, loans are great for a short-term, you know, somebody that’s in a crunch, but they scare people too. you know, somebody has to be, also, you know, the person has to be willing to take the risk. And if you don’t sell the house, going to, like, the rate’s not great. Like, the interest only is a lot.

    Dylan Silver (13:07)
    Okay.

    Yeah, and that’s a situation that a lot of folks that are in the single family space have run up against over the last couple of years. ⁓ And it’s a lot in large part because of how much new construction we’re seeing. Right. So when you’ve got some, you know, national builders who are putting up new homes outside of the four metros, right, San Antonio, Austin, Houston, Dallas for two hundred thirty thousand dollars, it’s hard to, you know, price your pre-owned home at either

    that point or just below because someone in their head is going to justify well, if it’s only $20,000 more for this brand new home, or at a lower rate, it’s it’s it’s tough to see. you are seeing some of these homes sit for for longer. And that’s why people are having to pivot away sometimes from like a fix and flip exit if it’s if it’s staying on market for too long.

    Tracey Stillman (14:00)
    in the Senate.

    Exactly. you know, we’ve had so much construction, you know, happening, and especially like in 22, someone might have paid, let’s just say someone in Van Nuys or Justin bought a house for 550,000 at the top of the market. It’s now worth, you know, we just, just had somebody lose $100,000, selling it. went from 550, he had to move for a job and he had to settle for 450.

    I mean, that’s a big difference. So that’s what, you’re seeing a lot of that new construction kind of going up against that. But the Bridge Along does work for crunch situations and if you’re willing to take on the risk.

    Dylan Silver (15:41)
    I want to ask you about some of the trends that I’ve seen more broadly in Texas investing. I mentioned one of them, which is it’s just tougher to do fix and flip. So folks may be looking at some other strategies, whether that’s a short term rental Airbnb or ⁓ long term year to year lease. Corporate housing seems to be coming up to traveling nurses and what have you. But I’ve also seen a lot of development and not just from national builders.

    that everybody knows, but also from folks who may be newer developers, folks who may have been, you know, a single family investor or a flipper. And now they’re realizing, hey, in order to compete, I’ve really got to be able to get into ground up construction, new builds. Is there any overlap between the the lending that is done on, you know, single family homes and lending that is done in new development, new builds? Or is that like a total other area entirely?

    Tracey Stillman (16:42)
    It is, it is a totally different market for sure. ⁓ Especially if they’re into multi-unit development, I don’t want to say apartments, maybe. Something like that. In a regular world of mortgages, we could do a two to four unit ⁓ building standard, but…

    Dylan Silver (16:54)
    something like that,

    Tracey Stillman (17:06)
    Like if you’re gonna do units with like 10 or whatever, that’s a whole different ball game into the commercial side of things.

    Dylan Silver (17:13)
    Now, ⁓ is that standard for folks who are lending on single family one to four to also lend on ground up construction one to four or is that uncommon in the lending space?

    Tracey Stillman (17:26)
    It used to not be uncommon. used to be, you know, seven years ago, was a thing, Flagstar did them all the time. But now they’re just because of this, you know, the way the market kind of changed, they had to pull back a lot of that construction loan lending. It’s a lot harder to find a lender now for construction.

    Dylan Silver (17:49)
    You know, one of the tricky parts of this too is, is there’s a huge onus on the operator, right? So if you’re a newer operator, there’s so much that you’re going to learn effectively. And of course, you’re going to see this in rehabbing as well. But typically, when you’re looking at a pre-owned home, you kind of generally know that, hey, there might be some foundation issues that,

    roof, this and that. if this is your first time doing a new build, you know, now you’re having to look at the soil, you know, and laying foundation and, you know, managing framing like there’s whole other area of rehab. I have no experience with this can cause someone to really fall behind. Not to mention like permitting and zoning and things of that nature.

    Tracey Stillman (18:29)
    yeah.

    Exactly. Yeah. mean, construction is a whole other animal. Like, it really is. And you have to, you you have to have the right investor to give you the construction loan. You got to know if there’s you know, beginning construction all the way through to permanent financing. ⁓ We used to have a lot more products. Now we have one. I mean, it’s like, you really have to research that before you start that project, because you start the project and you’re like, boy, I’ve,

    getting off more than I can chew. And it really has changed. The construction loan business has changed a lot in the last seven years. We used to have, there used to be a dime a dozen and they’re just not anymore.

    Dylan Silver (19:23)
    Yeah, it’s it’s a it’s a trickier game to play. No question. Just because you can swing a hammer does not mean that you can build a home. I do want to ask you about Dallas. I lived in Denton, right and DFW Metro and living up there having moved from San Antonio. I lived in San Antonio for about four years. I realized Dallas has got to be one of the in my opinion, personal opinion, one of the best markets to

    Tracey Stillman (19:30)
    Right.

    Dylan Silver (19:50)
    watch real estate investing, to participate in real estate investing, to be a homeowner. I think for so many reasons, for the ⁓ entry point, for the number of people that are moving there, for the businesses, also for the national interest that right now is on Texas, Dallas seems to have a lot really going for it from an investment standpoint.

    Tracey Stillman (20:11)
    And I mean, I mean, there’s businesses coming here all the time. We’re going to have the stock market here for God’s sake, like kind of a big deal. I mean, DFW is a great area to definitely think about being an investor or being a homeowner in general. I mean, you just have to, again, I always, and this is what I would say to anyone, like whenever you’re deciding to do something in the real estate, make sure you, really focus on location.

    and what your goals are and what, you know, like a lot of people will say, well, why do you live in Dallas? And I’m like, well, don’t have, I’m not raising children anymore. So I don’t really have to worry about a school district, right? So, you know, I mean, living in the city of Dallas, you have to think about that if you’re raising kids, right? Well, like, you know, I probably would send them to private school, which a lot of people in my neighborhood do, but I think location, location, location, no matter what the situation is.

    always know where you’re looking for your location for your goals. And that’s just what I would say in general.

    Dylan Silver (21:12)
    Yeah, I echo that you hit the nail on the head, right? So I mean, if you could have, you know, predicted however many years ago that there would be this, you know, corridor from DFW straight up to Oklahoma, that was just going to be, you know, town after town after town, and that this is all going to be developed, you would have said, Well, I’m just going to buy everything that I have the opportunity to. So, you know, you see these kind of concentric circles of expansion. And so really,

    If you’re anywhere in the DFW metro or surrounding area, you’re probably in a good spot, especially if you can afford to hang onto that asset for five or so years.

    Tracey Stillman (21:47)
    Right. And that’s what I, you know, that’s why when I was talking about that house that was in Justin or Van Nuys or wherever he lost my, it’s just because he didn’t hang on to it long enough. Like that’s the, that was, he didn’t have choice. had to move. But I think in general, in the DFW area, you’re going to get a good return on your money, period. Like you will get it if you hang on to it long enough. And that’s in general, I will say it anyway, but.

    Dylan Silver (22:12)
    It’s yeah, maybe more true in some places than others. But yeah, absolutely. We are actually coming up on time here, Tracey, where can our audience go to reach out to you? And maybe they need a loan for themselves or a product they’re working on? How can folks reach out to you or your team?

    Tracey Stillman (22:29)
    Absolutely. You can find us at StillmanBiggersTeam.com and that’s Stillman, S-T-I-L-L-M-A-N, Biggers, B as in boy, I-G-G-E-R-S, that’s my son’s last name, Team.com, that’s our website. Or you can call me directly at 303-346-5349, or you can email me at [email protected].

    Dylan Silver (22:53)
    Tracey, thank you so much for coming on the show today.

    Tracey Stillman (22:56)
    Hey Dylan, it was a pleasure. Let’s stay connected. I appreciate you so much.

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