How LTV Affects Single Family Rental Financing

 

Investors evaluating rental financing often encounter two important measurements: DSCR and loan-to-value. Although both relate to the financing of a property, they measure different things. DSCR focuses on income and debt service, while LTV focuses on the amount borrowed compared with the property's value. Both can matter when reviewing single family rental loans.

Loan-to-value, or LTV, expresses the loan amount as a percentage of the property's value. For example, an 80% LTV means the loan represents 80% of the property's value, leaving 20% to be covered by the borrower's equity contribution under that structure. LTV therefore helps determine how much leverage is being used in the transaction.

A DSCR lender can consider LTV alongside the property's rental income. A property may generate enough income to meet a DSCR requirement, but the requested loan amount must also fit within the lender's LTV limit. This means investors cannot determine potential financing solely by looking at monthly rent.

InstaLend's SFR program offers loan amounts from $75,000 to $5 million or more, with financing of up to 80% LTV and a 20% minimum down payment. The same program uses a minimum DSCR of 1.0x and minimum credit score of 660. These are specific InstaLend program terms rather than universal requirements. Investors comparing single family rental loans should therefore review both the income qualification and leverage available under each lender's program.

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