Question 1

Can I use short-term rental income to qualify a Waco DSCR loan?

Accepted Answer

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.

Question 2

Does Waco cap how many unrelated tenants can share a rental near Baylor?

Accepted Answer

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.

Question 3

How much does the local tax rate eat into the DSCR ratio on a Waco property?

Accepted Answer

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.

Question 4

Which Waco-area submarket gives the strongest gross rent-to-value yield?

Accepted Answer

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.

Question 5

Does McLennan County's hail exposure change how a Waco DSCR loan gets underwritten?

Accepted Answer

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.

Question 6

What is a DSCR loan, and how do I qualify without tax returns?

Accepted Answer

A DSCR (debt service coverage ratio) loan qualifies on the property's rental income instead of your personal income, so there are no W-2s or tax returns required. We compare the rent, from a signed lease or the appraiser's market-rent estimate, against the monthly payment. A DSCR of 1.00 means the rent covers the payment, and we lend with a DSCR as low as 0.75.

Question 7

What rate and terms can I get on a rental loan?

Accepted Answer

Our rental program starts around 5.50% interest-only, with 30-year fixed and 5/7/10-year ARM options, for a single property or a whole portfolio. The lowest pricing goes to strong credit, lower leverage, and a DSCR above 1.20; your quote depends on the file and is subject to underwriting.

Question 8

How much can I borrow, and what is the maximum LTV?

Accepted Answer

We finance up to 80% loan-to-value on a purchase, with rate-and-term and cash-out refinances available, on loan amounts from $100K to $3M. Cash-out leverage is typically a little lower than purchase. The property's cash flow and your credit set your final leverage.

Question 9

What credit score do I need for a DSCR loan?

Accepted Answer

We start at 640, and the best pricing goes to strong credit. Because the loan qualifies on the asset, your score affects your rate and leverage more than whether you are approved.

Question 10

Can I get a DSCR loan on a short-term rental (Airbnb)?

Accepted Answer

Yes, short-term rentals are considered. We can underwrite using market or projected rents, and the property still needs to meet our DSCR. Tell us how the property is operated so we can structure it correctly.

Question 11

Is there a prepayment penalty?

Accepted Answer

Long-term rental loans usually carry a prepayment penalty, commonly a step-down such as 5/4/3/2/1. We offer flexible prepay structures, including buying down to a shorter penalty for a slightly higher rate, and we will lay out the options on your term sheet.

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