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DSCR Loan Arizona - November 2023

Last Updated: November 9, 2023

Rental property investors in Arizona are facing a challenging financing environment because elevated rates have made it difficult to qualify for a high enough loan amount on purchase and refi transactions. The best DSCR lenders in Arizona are able to structure your loan terms to get your deal done and ensure that you're positioned to continue growing your rental portfolio.

Arizona, particularly greater Phoenix, is a wonderful place to invest in real estate and build a rental property portfolio. Discover the best DSCR loan Arizona has to offer and grow your rental portfolio with the lowest interest rate, lowest fees and highest leverage.

We don't need to tell you that you have many choices when it comes to getting a DSCR loan for your next purchase or refi. That's why it's so important to understand how DSCR loans work, how DSCR lenders work, and how to get the best possible terms so you can grow your portfolio in a manner that optimizes cash flow and eliminates unnecessary expense.

DSCR Loan Interest Rates in Arizona

DSCR loan interest rates in Arizona tend to be slightly more lower than the national average. This is because DSCR loan interest rates decrease as the loan amount increases, and the median home price in Arizona is higher than the national average.

The DSCR Loan Interest Rate Index shown below indicates the current and historical DSCR loan interest rate pricing for borrowers with 720 credit score where the subject property has a DSCR of 1.2 at 75% LTV. Don't worry, we'll get into what this means in a moment!

What does DSCR mean?

DSCR stands for Debt Service Coverage Ratio, a simple cash flow metric that divides net operating income of your rental property by the your mortgage principal and interest.

Net Operating Income ÷ Mortgage Payment

The simplest way to think about DSCR is that lenders require a minimum DSCR at a given loan amount. As your loan amount increases, your DSCR decreases. This is because your mortgage

How to calculate DSCR for Arizona rental properties

There are actually a few different versions of the DSCR formula, and different lenders use different versions. For this reason, it's important to understand how your lender calculates DSCR so you can avoid surprises -- like a lower loan amount than expected -- when you receive your approved loan terms.

The easiest way to calculate DSCR is to use our DSCR calculator.

Best markets in Arizona for DSCR loans

The best markets for DSCR loans are those that are densely populated. In fact, most DSCR lenders in Arizona do not lend for properties that are designated as rural. When reviewing your appraisal report, lenders want to see comps within 1 mile of your subject property. The farther away the comps, the less confidence your lender will have, and the more likely they will be to reduce leverage (lower LTV) or deny your loan.

City Population County
Phoenix 1,680,992 Maricopa
Tucson 545,975 Pima
Mesa 518,012 Maricopa
Chandler 257,165 Maricopa
Scottsdale 255,310 Maricopa
Glendale 247,945 Maricopa
Gilbert 247,542 Maricopa
Tempe 195,805 Maricopa
Peoria 172,259 Maricopa
Surprise 141,664 Maricopa
Yuma 97,908 Yuma
Avondale 87,931 Maricopa
Goodyear 86,840 Maricopa
Casa Grande 57,233 Pinal
Lake Havasu City 57,039 Mohave
Buckeye 56,370 Maricopa
Maricopa 50,154 Pinal
Sierra Vista 44,888 Cochise
San Luis 33,315 Yuma

Is Arizona a good market to buy rental properties?

According to market data from Zillow, home prices in Arizona have increased 47% since the start of the COVID-19 pandemic (March 2020). It's incredible to see such an increase from $282,000 to $414,000 in just 3 years! At the same time, rent has also grown by over 30%, but it has not kept up with home prices.

We rate core Arizona rental markets, specifically the cities listed above as above average given economic development, population growth and favorable property taxes.

Cash out refi DSCR loans

Given home price appreciation in Arizona, you may be interested in a cash out refinance of your rental property. You can cash out up to 75% of the current value of the rental property (Loan-to-Value, LTV) with a DSCR loan at interest rates that are only slightly higher than the conventional 30 year fixed rate mortgage.

DSCR calculator (Will it cash flow?)