Texas · DSCR rental loans

Texas DSCR Loans: Rates, Requirements and the Numbers That Matter

A Texas DSCR loan qualifies on the property's debt service coverage ratio (DSCR), its monthly rent divided by its full monthly payment, not on your tax returns. In Texas the line that decides most deals is property tax. Inside Dallas city limits the combined rate is about 2.23% of value a year, so on a typical single-family rental the tax bill alone eats about 28% of the rent before the lender is paid.

Get Funding How DSCR loans work

Apply in 60 seconds
Fast closings
No credit pull to apply

Texas effective property tax rate: 1.40% (7th highest)
City of Dallas combined rate: 2.23% of value
Max purchase LTV (published): 80%; 85% at 720–740+
Real estate transfer tax: None

Texas figures from the sources below, updated October 23, 2026. Not an offer.

Texas costs

Property tax, not the interest rate, is the biggest swing in a Texas DSCR payment.

DSCR lenders divide rent by the full monthly payment: principal, interest, taxes, insurance and HOA dues (PITIA). Each cost below lands in that payment, so each one moves your ratio.

WORKED EXAMPLE · DALLAS SINGLE-FAMILY RENTAL

Purchase price: $360,000
Loan at 75% LTV, 7.25%, 30 years: $270,000
Monthly rent: $2,350
Principal & interest: $1,842
Property tax ($2.226885 per $100 ÷ 12): $668
Insurance ($2,864 ÷ 12): $239
HOA: $0
PITIA: $2,749

DSCR0.85

Price and rent sit at the Dallas–Fort Worth typical single-family value and rent (Zillow, September 2026); insurance uses the 2023 Texas HO-3 average, and a landlord quote will differ. $2,350 ÷ $2,749 = 0.85. At Dallas County's 1.45% average rate the tax would be $435 and the DSCR 0.93, which is why underwriting on the full rate matters. To reach 1.00 at this rent you would need a loan of about $211,500 (59% LTV); interest-only payments alone get you to 0.93. Some lenders accept 0.75–0.80. Illustrative only — not a rate quote.

Property tax, statewide: Owner-occupied homes paid 1.40% of value in 2024, the 7th-highest rate in the US. Texas levies no state property tax and no income tax; school districts, counties, cities and special districts each set their own rate, and school districts levy more than half of the total.
Property tax, Dallas: $2.226885 per $100 of value inside the City of Dallas, combining the city, Dallas County, Dallas ISD, Dallas College and Parkland Hospital. That is about $8,017 a year, or $668 a month, on a $360,000 rental.
County averages understate a rental's bill: Effective rates on owner-occupied homes in 2024: Dallas County 1.45%, Harris 1.50%, Tarrant 1.54%, Bexar 1.55%, Travis 1.31%. Those are averages of what homeowners actually paid, and homeowners can claim a residence homestead exemption that a rental never gets: it applies only to an owner's principal residence. Underwrite a rental on the full combined rate for its address.
Homestead savings the seller had and you won't: School districts must exempt $140,000 of a residence homestead's value, and only an owner's principal residence qualifies. At Dallas ISD's $0.993835 per $100, that exemption alone is worth about $1,391 a year, or $116 a month, to a homesteaded seller. Underwrite the Dallas example below on the seller's school tax and the DSCR looks like 0.89; the real figure is 0.85.
The 20% cap won't cover a new purchase: Texas's circuit-breaker limit holds yearly increases in the appraised value of non-homestead property worth up to $5 million (indexed for inflation after 2024) to 20%. It starts only on January 1 of the tax year after the first year you own the property on January 1, so a rental you buy gets no cap for at least its first full tax year. As written, the statute also expires December 31, 2026, so a rental bought now won't reach it unless the Legislature extends it.
MUD and special district taxes: Some subdivisions, especially newer suburban ones, sit inside a municipal utility district or similar district that adds its own rate to the city, county and school rates. Texas Water Code §49.452 requires the seller to give you the district's written notice before you sign a binding contract, and lets you terminate if it arrives later. Add the district rate before you run the ratio: every 0.50% of value on a $360,000 rental adds $150 a month to PITIA.
When the bill is due: Texas property taxes are generally due by January 31 of the following year, and penalty and interest start on most unpaid bills February 1. However you pay it, the DSCR uses the annual bill divided by 12.
Appraisal protests: Your tax is the rate times the appraisal district's value. You can protest that value by May 15 or 30 days after your notice is delivered, whichever is later. Every $10,000 cut from a Dallas rental's value lowers the tax line by about $19 a month.
Insurance: The average Texas HO-3 homeowners premium was $2,864 in 2023, 65% above the $1,737 national average. Hail is a big reason: Texas recorded 902 major hail events in 2025, more than any other state. Landlord policies are priced separately, so get a quote before you fix your numbers.
Coastal windstorm: In the 14 first-tier coastal counties and parts of Harris County east of Highway 146, wind coverage is available from the Texas Windstorm Insurance Association (TWIA). TWIA requires a WPI-8 certificate of compliance on structures built, altered or repaired since January 1, 1988, so ask the seller for it before you close.
Condo insurance: The average Texas condo unit-owner (HO-6) policy cost $999 in 2023, against $658 nationally. Unit policies don't cover the building structure, and the premium comes on top of the HOA dues in your PITIA. A landlord policy on a rented unit is priced separately, so quote it before you offer.
Transfer tax: None. Since 2015 the Texas Constitution has barred new taxes on transactions that convey real estate title, so a Texas purchase carries no state or local transfer tax.

Markets

Rent-to-price is thinnest in Austin and Dallas and fattest on the border and the coast.

Single-family rents and values from one dataset, so the yields compare like for like. Gross yield is 12 months of rent divided by value, before taxes, insurance, vacancy and repairs. At Dallas's 2.23% combined rate, property tax alone uses 2.2 points of a 7.8% gross yield.

Metro	Single-family rent	Single-family value	Gross yield	Rent change, 12 mo
Dallas–Fort Worth	$2,345	$361,000	7.8%	+1.8%
Houston	$2,220	$307,000	8.7%	+0.9%
San Antonio	$1,820	$275,000	7.9%	+0.5%
Austin	$2,285	$421,000	6.5%	+1.7%
El Paso	$1,767	$234,000	9.1%	+4.4%
Corpus Christi	$1,963	$220,000	10.7%	+0.7%
Killeen–Temple	$1,574	$248,000	7.6%	0.0%
McAllen	$1,756	$190,000	11.1%	+1.8%

Swipe the table to see every column →

Source: Zillow Observed Rent Index (single-family homes, smoothed) and Zillow Home Value Index (single-family homes, middle tier, smoothed and seasonally adjusted), metro areas, September 2026, downloaded October 19, 2026. Gross yield = 12 × rent ÷ value. Rents come from rental listings and values from all homes, so the two indexes don't describe the same houses: treat the yield as a market signal, not a deal number.

Texas rules

Texas rules that change a rental deal.

Foreclosure is fast and out of court: Texas deeds of trust let a lender sell the property at auction without a lawsuit, after at least 21 days' notice, on the first Tuesday of a month. The statute's 20-day notice to cure applies to a borrower's residence, so a rental may get less warning. ATTOM put Texas's average foreclosure timeline at 155 days in Q2 2026, the shortest in the US. Keep real reserves.
Short-term rentals: Austin and Dallas: Austin requires an operator's license for stays under 30 days, the license number must appear in every listing, and platform rules took effect July 1, 2026, with delisting of unlicensed units being phased in. Dallas voted in 2023 to ban short-term rentals in single-family districts, but a court injunction blocks enforcement while the city's appeal sits at the Texas Supreme Court. Check current rules before you buy.
Short-term rentals: Houston and San Antonio: Houston has required annual registration, at $275 per property, since January 1, 2026. San Antonio requires a permit; Type 2 permits, for homes the owner or operator doesn't live in, are allowed by right up to 12.5% of the units on a blockface and cost $1,000 plus a surcharge for three years. Rules change often, so confirm with the city first.
Hotel tax on stays under 30 days: Short-term rentals owe the 6% state hotel occupancy tax, and cities, counties and venue districts can add their own; the combined rate can't exceed 17%. Guests usually pay it, but you collect and remit it, so build it into your pricing and your income projection.
Rural Texas gets less leverage: Roc Capital and Civic don't finance rural rentals, and Easy Street caps rural loans at 65% LTV. If the property is outside a metro, ask about rural eligibility before you order the appraisal.
HOA leasing rules: Texas had about 22,900 community associations with 6.2 million residents in 2024. State law limits how far an HOA can police your tenants: it can't require tenant approval, a tenant's credit report or the rental application, though it may ask for occupants' contact details and the lease start date and term. It can still enforce restrictions on leasing or occupancy written into the deed restrictions, such as a minimum lease term, so read them before you count on the rent.
Closing in an LLC: Every DSCR lender in our October 2026 review allows an LLC borrower, and Lima One, Roc and Civic require one, usually with a personal guarantee. For Texas franchise tax and entity questions, talk to a CPA or attorney before you form the company.

Texas DSCR loan questions

What does DSCR mean on a Texas rental loan?

DSCR is the debt service coverage ratio: the monthly rent divided by the monthly principal, interest, taxes, insurance and HOA dues. Texas rentals often score lower than the same rent would elsewhere because the tax line is so large. In the Dallas example above, $668 of the $2,749 monthly payment is property tax, and the ratio lands at 0.85.

What DSCR do lenders require on a Texas rental?

The minimum is set by the lender, not the state. Published minimums in October 2026 ran from 1.00–1.05 at the conservative end to 0.75–0.80 elsewhere, and a few lenders offer no-ratio loans at lower leverage. Because Texas taxes inflate the payment, run the ratio on the full tax rate before you make an offer.

How do Texas property taxes change a DSCR loan?

Taxes are part of the payment the rent must cover. At the City of Dallas's 2.23% combined rate, a $360,000 rental carries $668 a month in tax. At a 1.00% rate that line would be $300. On $2,350 of rent with a $270,000 loan, the extra $368 drops the DSCR from 0.99 to 0.85, enough to move a deal across a lender's minimum.

Can I get a Texas DSCR loan in my LLC?

Yes. DSCR lenders allow an LLC borrower and several require one, usually with a personal guarantee from the owners. Expect to provide the entity documents along with the usual purchase file. For Texas franchise tax or liability questions, ask a CPA or attorney; lenders don't advise on entity setup.

Can I use a DSCR loan for an Airbnb in Austin or Dallas?

Many lenders finance short-term rentals, but city rules decide whether the income is legal. Austin requires an operator's license shown in every listing. Dallas's 2023 single-family ban is blocked by an injunction while the city appeals, so the rules could change. Confirm licensing before you rely on short-term income.

Is there a transfer tax when I buy a rental in Texas?

No. The Texas Constitution has barred new transfer taxes on real estate sales since 2015. Your closing costs are title insurance, lender fees, the appraisal and prepaid items such as tax and insurance escrows. Title premiums are set by the state, so they don't vary between title companies.

Can I protest the property tax on a Texas rental?

Yes. Any owner can protest the appraisal district's value, by May 15 or 30 days after the notice of appraised value is delivered, whichever is later. A lower value lowers the tax line in your PITIA, which raises your DSCR at refinance time. Many investors protest every year.

Will my Texas property taxes go up after I buy a rental?

Often, yes. A homesteaded seller pays school tax on $140,000 less value than you will, so their bill understates yours. Texas's 20% circuit-breaker cap on other property doesn't apply in your first full tax year of ownership and, as written, expires at the end of 2026. Run the ratio on the price you're paying times the full combined rate for the address.

Do MUD taxes count in a DSCR calculation?

Yes. A municipal utility district tax is a property tax like any other, so it goes in the taxes line of your PITIA. The seller must give you the district notice before you sign a binding contract. Add its rate to the city, county and school rates; on a $360,000 rental, each 0.50% of value adds $150 a month to the payment.

Can a Texas HOA stop me from renting my property?

It depends on the deed restrictions. Texas law bars an HOA from requiring tenant approval, credit reports or rental applications, but it leaves room for leasing and occupancy restrictions written into the community's dedicatory instruments. Read them and ask for any rental rules in writing before you close, because a leasing limit can cut the rent your DSCR depends on.

Can I live in a property financed with a Texas DSCR loan?

No. DSCR loans are business-purpose loans for rental property that neither you nor your family will occupy. If you plan to live in the home, even part-time, you need a residential mortgage instead. A house you rent to a tenant, in your name or your LLC's, is what a DSCR loan is built for.

Texas funding

Fast DSCR funding in Texas.

Your name and number first, then a few quick taps — about 60 seconds. A loan specialist calls you back to lock in your terms.

Takes about 60 seconds
No credit pull to apply
A loan specialist calls you back fast

STEP 1 OF 8No credit pull to apply

Related loan programs

Rental loanDSCR rental loansQualify on the property's rent, not your tax returns. Close in your LLC.Learn more →Rental loanShort-term rental loansRental financing for Airbnb and VRBO homes, sized on nightly income.Learn more →Rental loanRental cash-out refinancePull equity out of a rental to fund the next purchase.Learn more →

Sources and methodologyUpdated October 23, 2026

Figures are market ranges from published lender terms and public data on the dates shown. They describe the market and are not an offer. Your terms depend on the property, your credit and your experience.