DSCR Loan Application Step by Step for Canadians

You have done the research, picked a US market, and found a property that pencils out. Now you need to actually get the financing in place. For most Canadians buying rental properties in the United States, a DSCR loan is the clearest path forward. No US credit history required. No US income verification. The property qualifies itself.

But the application process is not the same as walking into your local Canadian bank and signing papers. There are entity structures to set up, specific documents to prepare, and timelines to manage. Miss a step and you could delay your closing by weeks or lose the deal entirely.

This guide walks you through every stage of the DSCR loan application from start to finish so you know exactly what to expect.

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What a DSCR Loan Is and Why It Works for Canadians

A DSCR loan (Debt Service Coverage Ratio loan) qualifies the property, not the borrower. Instead of analyzing your personal income, tax returns, or employment history, the lender looks at one thing: does the property’s rental income cover the mortgage payment?

The DSCR ratio is calculated by dividing the property’s gross rental income by the total mortgage payment (principal, interest, taxes, insurance, and any HOA fees). A ratio of 1.0 means the rent exactly covers the payment. Most lenders want to see a DSCR of 1.0 or higher, though some will approve deals down to 0.75-0.80 with compensating factors like a larger down payment.

This structure is ideal for Canadians because:

• No US credit score needed. You do not have one, and DSCR lenders do not require one for foreign nationals.
• No US income verification. Your Canadian employment or business income is irrelevant to the approval.
• No US tax returns required. The property’s income is what matters.
• Entity-based lending. You borrow through a US LLC, which also provides liability protection.

If you are new to investing across the border, our overview of mortgage financing for Canadians in the USA covers the broader landscape of available programs. For a look at how DSCR loans fit into a full cross-border strategy, read our guide on building a US real estate empire from Canada.

Step 1: Set Up Your US LLC and EIN

Before you do anything else, you need a US entity. Nearly every DSCR lender requires foreign nationals to hold property through a US Limited Liability Company (LLC).

Why You Need an LLC

The LLC serves two purposes. First, it provides a legal structure that DSCR lenders can underwrite. Second, it creates a layer of liability protection between the property and your personal assets. If a tenant sues, the LLC is the defendant, not you personally.

How to Form the LLC

You can form an LLC in any US state, but most Canadian investors choose the state where they are buying property or a business-friendly state like Wyoming or Florida. The process involves:

1. Choose a registered agent. Since you do not live in the US, you need a registered agent with a physical address in the state. This costs roughly $100-$300 per year.
2. File articles of organization. This is the formation document filed with the state. Filing fees vary from $50 to $500 depending on the state.
3. Draft an operating agreement. This internal document outlines ownership and management. Even if you are the sole member, lenders want to see it.
4. Apply for an EIN. An Employer Identification Number is the LLC’s tax ID. You apply through the IRS. As a foreign national without an SSN, you will need to apply by mail or fax using Form SS-4, which typically takes 4-6 weeks.

Start the EIN process early. That 4-6 week timeline is the single biggest bottleneck for Canadian investors and has derailed more closing dates than any other factor.

Open a US Bank Account

With your LLC and EIN in hand, open a US business bank account. You will need this for rental income deposits, mortgage payments, and property expenses. Some banks require an in-person visit, but several now offer remote account opening for foreign nationals.

Step 2: Select Your Target Property

DSCR lenders are not just qualifying you. They are qualifying the property. This means your property selection directly impacts whether you get approved and on what terms.

What Lenders Want to See

• Property type: Single-family homes, duplexes, triplexes, fourplexes, condos, and townhomes. Some lenders go up to 8 units.
• Property condition: The property must be habitable and in rentable condition. Major deferred maintenance can kill a deal.
• Minimum property value: Most DSCR lenders set a floor around $100,000-$150,000. Below that threshold, expect worse terms or outright rejection.
• Market rents that support the debt: The property needs to generate enough rental income for a DSCR of 1.0 or better. Run these numbers before you make an offer.

Run your numbers through our DSCR Loan Calculator to see if your property qualifies.

This is where working with a team that understands Investment Property Lending Locations becomes critical. The right advisor can help you identify markets where the numbers work.

For a deeper look at how rental income math affects your approval, check out our article on DSCR loans for foreign nationals.

Step 3: Choose Your DSCR Lender

Not all DSCR lenders work with Canadian borrowers. Some only serve US citizens. Others technically serve foreign nationals but have minimal experience with cross-border transactions. You want a lender who has closed multiple deals for Canadians and understands the nuances.

Key Factors to Compare

• Down payment requirements: Typically 20-25% for foreign nationals. Some lenders require 25% on the first deal and relax to 20% for subsequent purchases.
• Interest rates: Check current rates, as they shift regularly. DSCR loans carry higher rates than conventional US mortgages because of the reduced documentation requirements.
• Minimum DSCR: Most lenders require 1.0, but some accept 0.75-0.80 with a larger down payment.
• Prepayment penalties: Common in DSCR loans. Typical structures are 3-2-1 (3% if you prepay in year one, 2% in year two, 1% in year three) or 5-4-3-2-1. Factor this into your hold strategy.
• Seasoning requirements for refinances: If you plan to use a BRRRR strategy, ask how long you must hold the property before refinancing. Six months is standard, but some lenders require twelve.

LendCity works with multiple DSCR lenders who actively serve Canadian investors. We can match you with the right program based on your specific deal. Learn more about Mortgage Financing for Canadians in the U.S.A..

Step 4: Prepare and Submit Your Application

Once you have your LLC set up and a property under contract, it is time to submit the actual loan application. Here is what you will need:

Required Documents

• Passport (valid Canadian passport)
• LLC documents (articles of organization, operating agreement, EIN confirmation letter)
• Purchase agreement (fully executed contract for the property)
• Bank statements (2-3 months showing sufficient funds for down payment, closing costs, and reserves)
• Proof of reserves (most lenders require 6-12 months of mortgage payments in liquid reserves post-closing)
• Rental income documentation (existing lease if the property is tenant-occupied, or a rent comparable analysis for vacant properties)
• Property insurance quote (from a US insurer, naming the LLC as the insured)
• US bank account information (for wire transfers and ongoing payment)

For a general overview of the application steps that apply to all DSCR borrowers, see our guide on how to apply for a DSCR loan.

Common Mistakes at This Stage

• Insufficient reserves. This catches many first-time cross-border investors. If the mortgage payment is $1,500 per month and the lender requires 6 months of reserves, you need $9,000 sitting in your account after closing.
• Documents not in English. If any bank statements or financial documents are in French, get them translated by a certified translator before submitting.
• LLC ownership mismatch. The LLC that holds the property must be the same entity on the loan application. If your spouse is on the LLC but not the loan, or vice versa, the lender will flag it.

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Step 5: Appraisal and Rent Verification

After the lender accepts your application, they order a third-party appraisal. This serves two purposes: confirming the property value and verifying that market rents support the DSCR.

What the Appraiser Does

The appraiser visits the property, evaluates its condition, compares it to recent sales (the “comps”), and provides a market rent estimate based on comparable rentals in the area.

If the appraised value comes in lower than your purchase price, you have three options: renegotiate the price with the seller, bring additional cash to cover the gap, or walk away.

If the market rent estimate results in a DSCR below the lender’s minimum, the deal may not work. This is why running your own rent analysis before making an offer is so important.

Timeline

Appraisals in most US markets take 1-3 weeks from the time they are ordered. In busy markets or rural areas, it can take longer. Build this into your closing timeline.

Step 6: Underwriting Review

With the appraisal complete, the full file goes to underwriting. The underwriter reviews everything: your documents, the appraisal, the DSCR calculation, the LLC structure, and the title work.

What Underwriters Look For

• Clean title. No liens, encumbrances, or unresolved ownership issues.
• DSCR compliance. The final ratio based on the appraised rent and actual loan terms.
• Entity verification. The LLC is properly formed, the EIN is valid, and ownership matches.
• Insurance adequacy. The property insurance meets lender requirements for coverage amounts and named insured.
• Reserve verification. Your bank statements confirm sufficient post-closing liquidity.

Underwriting typically takes 1-2 weeks. The underwriter may issue conditions, which are additional documents or clarifications needed before approval. Respond to conditions quickly. Every day of delay pushes your closing date.

Understanding the full DSCR loan requirements before you apply helps you avoid surprises during underwriting.

Step 7: Closing

Once underwriting issues a “clear to close,” the closing process begins. As a Canadian investor, you will likely close remotely.

Remote Closing Process

1. Title company sends closing documents. You will receive the loan documents, title documents, and closing disclosure electronically for review.
2. Wire transfer. You send your down payment and closing costs to the title company’s escrow account. Double and triple check the wire instructions by phone. Wire fraud is a real and growing risk in US real estate transactions.
3. Notarization. You sign the documents in front of a notary. As a Canadian, you can typically use a notary in Canada, but the documents may need to be notarized at the US Embassy or Consulate depending on the lender and state requirements. Confirm this early.
4. Recording. The title company records the deed and mortgage with the county. The property is officially yours.

Closing Costs

Expect to pay 2-5% of the loan amount in closing costs, which include origination fees, appraisal fees, title insurance, attorney fees, recording fees, and prepaid expenses like insurance and property taxes. Budget for the higher end to avoid surprises.

Common Pitfalls to Avoid

Having helped hundreds of Canadian investors navigate cross-border deals, here are the mistakes we see most often:

1. Starting the LLC and EIN process too late. Begin this the moment you decide to invest in the US. The EIN alone takes 4-6 weeks by mail.
2. Underestimating reserves. Budget for down payment, closing costs, and 6-12 months of reserves. Many investors plan for the first two and forget the third.
3. Choosing the wrong state for your LLC. Forming in Wyoming when you are buying in Ohio can create extra compliance requirements. Consult a cross-border accountant.
4. Ignoring the DSCR before making an offer. Run the numbers first. If the property does not hit a 1.0 DSCR at current rates, the deal will not get approved.
5. Forgetting about US tax obligations. Owning US rental property triggers US tax filing requirements. Work with a cross-border tax professional from day one. Our investor resources hub includes tools and guides to help you plan ahead.
6. Skipping property management. You are managing from another country. Professional property management is not optional. Budget 8-10% of gross rents.

Frequently Asked Questions

Do I need a US credit score to get a DSCR loan?

No. DSCR lenders who serve foreign nationals do not require a US credit score. The property’s rental income is what qualifies the loan, not your personal credit history. Some lenders may pull a Canadian credit report, but this is not standard across all programs.

How much do I need for a down payment?

Most DSCR lenders require 20-25% down for foreign national borrowers. The exact amount depends on the lender, property type, and your overall profile. Properties valued under $150,000 may require 25-30% down.

How long does the entire process take from start to finish?

If your LLC and EIN are already set up, expect 30-45 days from application to closing. If you are starting from scratch with entity formation, add 4-6 weeks for the EIN process. Total timeline: 8-12 weeks for first-time cross-border investors.

Can I use a DSCR loan for a property that needs renovation?

Standard DSCR loans require the property to be in rentable condition at closing. If you want to buy a fixer-upper, you would need a bridge loan or hard money loan for the acquisition and renovation, then refinance into a DSCR loan once the property is stabilized and rented. This is the BRRRR strategy applied to US real estate investing.

What happens if rents drop and my DSCR falls below 1.0 after closing?

The DSCR is evaluated at the time of application and closing. Once the loan is in place, the lender does not re-check the ratio. As long as you make your mortgage payments, a temporary dip in rental income does not trigger a default. That said, maintaining adequate reserves protects you during vacancies.

Can I buy multiple properties with DSCR loans?

Yes. There is no limit on the number of DSCR loans you can have. Many Canadian investors build entire portfolios this way, adding one property at a time. Each property is underwritten independently. For scaling your residential portfolio with investment mortgages, DSCR loans offer repeatable, predictable financing.

Do I need to visit the US to close on the property?

Not necessarily. Most DSCR loan closings can be handled remotely with documents notarized in Canada. However, some lenders and states have specific requirements about where notarization takes place. Confirm with your lender and title company early in the process.

What are current DSCR loan interest rates?

Rates change regularly based on market conditions. Check current rates with your lender or reach out to our team for up-to-date pricing. DSCR loans typically carry rates above conventional US mortgage rates due to the reduced documentation requirements and investor property classification.

Your Next Step

You now have the complete roadmap for getting a DSCR loan as a Canadian investor. The process is straightforward when you know what to expect and prepare properly. The biggest time savings come from starting your LLC and EIN setup early and having your documents organized before you find a property.

If you want to skip the guesswork and work with a team that has guided hundreds of Canadians through this exact process, we are here for you. Our team understands cross-border mortgage financing inside and out and can connect you with the right DSCR lender for your situation.

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