The Best DSCR Lenders in Tennessee (Rental Property Loans) [2025 Guide]

Tennessee is attracting investors thanks to its rapidly growing population, strong job market and business-friendly policies. Cities like Nashville, Chattanooga and Knoxville have become hubs for healthcare, tech and entertainment, creating consistent demand for both long-term rentals and short‑term vacation stays. According to iPropertyManagement’s latest estimates, the average monthly rent in Tennessee sits around $1,760, with a two‑bedroom unit averaging about $1,418 – roughly 17.7 % below the national average. This balance of affordability and steady cash flow makes the Volunteer State ideal for DSCR financing.

What is a DSCR loan? Before diving into lenders, it’s important to understand how DSCR loans work. DSCR loans rely on a simple but powerful principle: instead of underwriting you based on personal tax returns or employment income, the lender evaluates the rental property’s debt‑service coverage ratio. This ratio compares the property’s net operating income (rent minus operating expenses) to the annual mortgage obligation. A DSCR of 1.0 means the rental income exactly covers the mortgage payments; a DSCR above 1.0 indicates positive cash flow. Griffin Funding illustrates this with a hypothetical example in which a property generating $50 000 in rent and $40 000 in annual debt service yields a DSCR of 1.25. Investors with higher DSCRs generally qualify for better rates and lower down payments.

The DSCR threshold you must meet depends on the lender and the deal. Many lenders aim for a minimum DSCR of 1.25 to ensure comfortable cash flow, but some will lend to investors with DSCRs below 1.0 if they bring larger down payments or other compensating factors. Griffin Funding notes that a DSCR of 1.0 on a loan under $1 million may require a 15 % down payment and a 740 credit score, while ratios below 1.0 often necessitate a 25 % down payment and a 700 credit score. For credit scores, DSCR lenders typically look for a minimum of 620 and offer loan amounts from $100 000 up to $20 million. An appraisal is required to confirm the property’s value and rental income, and the loan must be used for a non‑owner‑occupied investment property.

DSCR loans are popular among real estate investors because they are non‑QM loans that don’t require traditional income verification. Benefits include streamlined approval, no limit on the number of financed properties, unlimited cash‑out, eligibility for short‑ or long‑term rentals, and the option to hold properties in an LLC to protect personal credit. However, investors should be prepared for larger down payments and potentially higher interest rates than conventional mortgages. DSCR loans currently account for nearly 29 % of non‑QM originations, underscoring their growing popularity.

DSCR requirements and loan features in Tennessee

Griffin Funding’s Tennessee DSCR guide explains that most lenders want a debt‑service coverage ratio of at least 1.25, although the company will work with applicants whose DSCR is below 1.0 in certain cases. Borrowers are expected to bring a minimum down payment of 20 %, and a credit score of 620 or higher is generally required. The lender calculates DSCR by dividing a property’s expected rental income by the annual debt obligations and uses this figure to determine whether a loan is viable.

These requirements illustrate the importance of evaluating your property’s cash flow before approaching lenders. A higher DSCR and strong credit profile will unlock larger loan amounts and more favourable rates. Conversely, investors with DSCRs below the typical threshold should plan for higher equity contributions or seek lenders known for flexibility.

Ranking of the best DSCR lenders in Tennessee

1. Select Home Loans – Leading the Tennessee Market

Website: SelectHomeLoans.com

Phone: 888-550-3296

Select Home Loans earns the top ranking for Tennessee investors because of its flexibility and commitment to customer service. Investors appreciate that Select Home Loans offers DSCR mortgages up to $5 million, provides rate‑buydown options and allows borrowers to close loans through LLCs. The lender focuses on quick pre‑approvals and transparent underwriting, making it easier to compete with cash buyers. Its loan officers are experienced with Midwestern markets and can advise on property types from single‑family rentals to small multifamily buildings. Select Home Loans typically requires a DSCR of 1.0 or higher, offers interest‑only periods and may finance short‑term rental properties. These features, coupled with competitive rates, make it the preferred choice for many Tennessee investors.

2. Griffin Funding 

A strong national lender with a branch in Tennessee, Griffin requires a minimum DSCR of 1.25 for conventional programs but will consider ratios below 1.0 with compensating factors. The company expects at least 20 % down and a 620 or better credit score. Loan amounts range from $100,000 up to $20 million, and interest‑only or 40‑year terms are available for added cash‑flow flexibility. Griffin also allows loans to be titled in an LLC and places no limit on the number of properties an investor can own.

3. Newfi Lending

Although based in California, Newfi has an investment‑property mortgage platform that lends in Tennessee. While its Indiana guide discusses eligibility (minimum credit score 640, DSCR 1.0 or higher, down payment as low as 20 %), these guidelines also apply to other states where Newfi operates. Newfi offers 30‑ and 40‑year fixed loans as well as interest‑only terms. For investors seeking long amortization periods to maximise cash flow, Newfi may be appealing. The lender allows DSCRs as low as 0.8, giving more flexibility for properties with tight cash flow. Newfi provides a simple online application and a DSCR calculator to estimate eligibility, making it easy for investors to explore options.

4. Kiavi and New Silver

Kiavi and New Silver are national DSCR lenders recognized for competitive rates and streamlined processes. Kiavi’s rental loans require no tax or income documentation and feature LTVs up to 80 %, rates starting at 7.25 % and no pre‑payment penalty after three years. New Silver, meanwhile, is highlighted for offering DSCR loans without a minimum DSCR requirement, making it an option for deals with minimal positive cash flow. Both lenders finance 30‑year fixed mortgages and can be useful for Tennessee investors who don’t meet local lenders’ requirements.

How to choose a DSCR lender

Finding the right DSCR lender requires balancing rate, term and service. Start by examining loan terms – look for lenders offering long amortization periods (30 to 40 years) and interest‑only options if you want to maximize cash flow. Compare minimum credit score, minimum DSCR and down‑payment requirements. Some lenders accept DSCRs as low as 0.65 or 0.75, while others insist on 1.25 or higher; ensure your property’s cash flow meets the threshold. Evaluate loan limits to ensure the lender can fund your portfolio growth. Many DSCR lenders cap loans at $2 million, but Select Home Loans and Griffin Funding lend up to $5 million or even $20 million for large projects. If you’re investing through an LLC, confirm that the lender allows entity borrowing and is comfortable financing multiple properties.

Next, assess fees and rates. DSCR loans typically have slightly higher interest rates than conventional mortgages because they are non‑QM products. Compare origination fees, points and ongoing costs. Some lenders, like Select Home Loans, offer competitive rates but may charge higher points upfront; others spread fees over the life of the loan. Check whether you can lock a rate and whether prepayment penalties apply – many DSCR loans carry penalties in the first two or three years.

Finally, consider customer service and local expertise. Select a lender with a track record in your target market and one that offers hands‑on guidance throughout the underwriting and closing process. Good lenders provide DSCR calculators, instant quotes and transparent documentation requirements. Reading reviews and speaking with other investors can help identify lenders known for quick closings and clear communication.

Steps to apply for a DSCR loan

1. Calculate your DSCR. Gather your financial statements, leases and expense estimates to determine the property’s net operating income. Use the DSCR formula (NOI ÷ annual debt service) to see whether your property meets the minimum ratio.
   
2. Consult lenders and get prequalified. Reach out to DSCR lenders such as Select Home Loans, Griffin Funding or local players to discuss your goals. Provide basic information about your property, credit score and experience to get a prequalification and rate quote. Many lenders offer instant quotes online.
   
3. Prepare your documents. Even though DSCR loans don’t require personal tax returns or W‑2s, lenders still ask for property‑specific documents such as an appraisal, rent rolls, leases, purchase contract, proof of insurance and LLC articles if applicable. You’ll also need bank statements to verify reserves and proof of funds for the down paymentl.
   
4. Submit a complete application. With documents in hand, formally apply and pay any upfront fees or appraisal deposits. The lender will order an appraisal and verify the property’s market value and projected rental income. Underwriters evaluate your DSCR, credit and experience.
   
5. Underwriting and approval. During underwriting, lenders may request additional information. If your DSCR or credit score is borderline, be prepared to justify the property’s cash‑flow potential or provide a larger down payment. Once underwriting is satisfied, you’ll receive a loan commitment outlining the rate, term and closing conditions.
   
6. Close and fund. Review the final loan documents, sign the promissory note and deed of trust, and wire your down payment and closing costs. After closing, the lender will disburse the loan funds and your investment property will begin generating rental income.
   

Tips to strengthen your DSCR and qualify for better terms

While DSCR loans focus on property cash flow, you can influence your ratio and qualify for more favourable terms. Griffin Funding recommends boosting rental income by raising rents to market levels, improving occupancy and offering amenities. If your DSCR is low because of high debt service, consider refinancing existing mortgages at a lower rate or extending the repayment term. Upgrading or renovating the property to command higher rents can also increase net operating income. Finally, reduce operating expenses by installing energy‑efficient appliances and renegotiating vendor contracts. These strategies improve cash flow and may help you qualify for a lower rate or smaller down payment.

Investors should also monitor their credit and build reserves. Lenders look favourably on borrowers with scores above 700 and at least six months of cash reserves. Building equity through a larger down payment or a portfolio of stable properties can offset a lower DSCR and secure better terms.

Conclusion

DSCR loans provide investors in Tennessee with flexible financing based on the cash‑flow potential of their rental properties rather than personal income. By understanding how DSCR is calculated and comparing lenders, you can select the best partner for your investment goals. Whether you’re acquiring your first duplex in Tennessee or refinancing a portfolio of vacation rentals, the lenders listed above – especially Select Home Loans – offer tailored solutions that help build long‑term wealth. With proper preparation and attention to DSCR metrics, Tennessee investors can secure competitive rates, unlock capital for new projects and continue expanding their rental portfolios.

Investing in Tennessee: markets and strategies

Tennessee’s diverse regions offer numerous investment opportunities. Nashville continues to lure young professionals with jobs in technology, healthcare and the music industry, leading to low vacancy rates and rising rents. In east Tennessee, cities like Knoxville and Chattanooga are experiencing revitalization driven by manufacturing and outdoor recreation. Meanwhile the Memphis metro area hosts major distribution hubs for companies like FedEx and Amazon, creating consistent demand for workforce housing. Investors can also tap the booming short‑term rental market in tourist destinations such as Gatlinburg, Pigeon Forge and the gateway towns around the Great Smoky Mountains National Park. DSCR lenders will typically finance single‑family homes, duplexes, small apartment buildings and even vacation rentals, provided the income projections are strong. Carefully analyze occupancy rates, seasonality and local regulations when evaluating these markets.

Additional DSCR lenders to consider

Beyond Select Home Loans and Griffin Funding, Tennessee investors should compare options from Kiavi (formerly LendingHome), Newfi, Lima One Capital and Angel Oak. Kiavi specializes in DSCR loans for one‑to‑four‑unit properties and offers 30‑year fixed and adjustable‑rate products with interest‑only periods; it can finance multiple properties and accepts DSCRs down to around 1.0. Newfi operates nationwide and advertises DSCR loans with as little as 20 % down, credit scores from 640 and DSCR ratios as low as 0.8. Lima One Capital takes a more conservative approach, requiring a DSCR of 1.5 or higher and FICO 700 but offers large loan amounts and no experience requirements. Angel Oak and Truss Financial Group offer specialized DSCR programs for real‑estate investors with 30‑ or 40‑year amortizations, interest‑only options and flexible underwriting. Comparing their terms alongside local credit unions and hard‑money lenders can help you identify the best fit for your strategy.

Navigating Tennessee’s legal and tax environment

One reason Tennessee remains attractive to investors is its absence of a state income tax on wages and relatively low property taxes. However, local municipalities may impose occupancy taxes on short‑term rentals, so confirm these costs when projecting cash flow. The state is considered landlord‑friendly, allowing swift eviction for non‑payment, but it also enforces building codes and safety regulations that investors must follow. DSCR lenders will review insurance and permit documentation to ensure compliance. Tennessee properties may be at risk for tornadoes or severe storms; budget for adequate insurance and consider reinforcing roofs and structures to reduce long‑term expenses. Understanding these local nuances will help you avoid surprises during underwriting and maintain a strong DSCR over the life of the loan.