DSCR loans for Waco rentals, qualified on cash flow.
Hold your rentals with financing that underwrites the asset, not just you. DSCR as low as 0.75, rates from 5.5% interest-only, and 30-year fixed options for single properties or whole portfolios. Waco zoning never capped unrelated tenants, so by-the-bedroom leasing near Baylor already works. Business-purpose only, and rates and structure are set in underwriting.
Typical figures, subject to underwriting and market conditions. Not a commitment to lend.
How it works
No tax returns or personal income docs in most cases. We qualify on the property's cash flow, so you can scale your portfolio without the paperwork drag of conventional lending.
Can I use short-term rental income to qualify a Waco DSCR loan?
Not on a typical single-family purchase, and this is the mistake that sinks a Waco pro forma. The classic non-owner-occupied Airbnb (STR Type II) is "Not Allowed" in Waco's R-E, R-1A, R-1B and R-1C zoning districts, and the city removed the special-permit path for it effective June 15, 2021. An STR license also does not transfer with the property at sale: the city says so directly, and grandfathering only survives if the same license holder keeps renewing it without a break. If a listing or seller pitches Waco as an easy Magnolia-adjacent Airbnb play, confirm the zoning district first. We underwrite Waco DSCR deals on long-term rent, not short-term projections that a zoning check can invalidate.
Does Waco cap how many unrelated tenants can share a rental near Baylor?
No, and that's a durable feature of this market, not a recent change. Waco's zoning defines "family" as an individual, related people, or a group of unrelated persons living together as a single housekeeping unit, with no numeric cap. The only exceptions are a two-person cap on a single-family dwelling that sits on a lot both under 50 feet wide and under 6,000 square feet, and a four-person cap that applies specifically to short-term rentals in the lowest-density districts. For an ordinary long-term rental near campus, by-the-bedroom leasing to Baylor students is already workable under the base code, no state legislation required.
How much does the local tax rate eat into the DSCR ratio on a Waco property?
About 2.25 cents on every dollar of assessed value, with no homestead exemption to soften it for an investor. Stacking the 2025 adopted rates with no exemption, a City of Waco address paired with Waco ISD runs 2.2484 per $100 of value: county 0.334805, McLennan Community College 0.131974, city 0.755000, and Waco ISD 1.026600. The county has since proposed a 6-cent increase for tax year 2026, about an 18% jump, so don't underwrite the tax line as flat over a five-year hold. China Spring, which is unincorporated and carries no city rate, comes in far lower at 1.4487 per $100 if a lighter tax stack matters more to your DSCR math than proximity to campus.
Which Waco-area submarket gives the strongest gross rent-to-value yield?
The city of Waco itself, with Lacy-Lakeview close behind. On Zillow's June 2026 figures, the city of Waco runs about an 8.2% gross yield: a $1,369 monthly rent on a $200,115 mid-tier home value. Lacy-Lakeview follows at roughly 7.8%. Hewitt and Woodway, the higher-priced school-district submarkets, trail at about 6.2% and 5.7%. Those are index-to-index comparisons, not cap rates, since they don't net out expenses, vacancy, or the 2.2484 tax stack, but they're the right starting point for comparing where to place a Waco-area DSCR deal. Run your own numbers with the DSCR calculator.
Does McLennan County's hail exposure change how a Waco DSCR loan gets underwritten?
It's worth budgeting for, because the loss years here swing hard. McLennan County paid $1,216 per homeowners policy in 2025, with wind and hail at 53% of that total. In 2023, a heavier hail year, the same county paid $2,575 per policy, with wind and hail alone at $1,986. That's more than double the carry in a bad year. Waco is roughly 180 miles from the Gulf and outside the state's coastal wind pool, so the exposure here is roof and hail deductibles, not hurricane wind. Underwrite your insurance line to a 2023-shaped year, not a 2025-shaped one, when you run the DSCR math on carry costs.
How much does Waco's 2.2484 tax stack raise the equity a DSCR rental needs?
Enough that you should plan on 20% of the purchase, plus closing costs. Leverage runs up to 80% LTV, so on a $200,000 Waco purchase that is up to $160,000 from us and $40,000 from you (200,000 x 80% = 160,000). Loan amounts run $100,000 to $3,000,000. Size the down payment with the tax line in view: a city of Waco address paired with Waco ISD carries 2.2484 per $100 of value and no homestead exemption, and that carry comes straight out of the ratio. More equity is the usual lever when a DSCR lands short. Subject to underwriting.
Does the city of Waco's 8.2% gross yield make a 0.75 DSCR easier to hit than Hewitt's 6.2%?
Usually, and the gates themselves are credit from 640 and DSCR from 0.75. A 0.75 ratio means we can work with a property that does not fully cover its own debt service yet, which matters in a county where the tax stack is heavy. No tax returns and no W-2s: the file qualifies off the property's rent. Credit is a gate here rather than the whole decision, and there is no hard pull to start. The city of Waco's roughly 8.2% gross yield is the strongest of the tracked submarkets, so ratios tend to pencil better inside the city than in Hewitt at 6.2% or Woodway at 5.7%. Subject to underwriting.
If I hold a Baylor-area rental three years and then sell, is there a prepayment penalty?
Prepay structures are flexible, and yours gets set in underwriting. Terms run 30-year fixed or a 5, 7, or 10 year ARM, so the real question is how long you actually intend to hold the door. Tell us the plan before we structure the loan. If the intent is a three-year hold near Baylor and then a sale, we structure to that rather than to a thirty-year assumption you would have to buy your way out of. Subject to underwriting.
More Rental / DSCR questions, answered on the program page
Local rules move. Every tax rate, fee, ordinance and market figure here comes from a primary source and carries the date we read it, and we correct them as the rules change. Where a number is mid-change or we could not verify it, we say so rather than guess. Before you commit a budget, confirm anything that drives it with the city or county, and talk to your attorney or CPA on questions of law or tax.
Published by USA Mortgage Funding, LLC, NMLS #152588. Researched from primary sources by our team, drafted with AI assistance, and every figure checked against its source before publishing. Where an answer rests on a public record, that record is linked under it. Figures read on 2026-08-13.
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