I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. Sub-1.0 DSCR loans are a real product with real lender programs — California’s rent-to-price ratios make them common in coastal markets. Call (800) 239-1103.
Yes — you can get a DSCR loan in California with a DSCR below 1.0. These are called sub-1.0 DSCR loans or no-ratio DSCR loans, and they exist for investors who see value in a property that doesn’t yet cash flow at full qualification.
When DSCR Falls Below 1.0 in California
California’s high home prices relative to rents make sub-1.0 DSCR extremely common — especially in coastal markets. A property in the Bay Area might rent for $3,200/month but carry a $4,800/month PITIA. DSCR = 0.67. Standard programs won’t approve it. But a no-ratio DSCR program can.
Sub-1.0 DSCR Loan Requirements
| Requirement | Sub-1.0 Guideline |
|---|---|
| Min down payment | 30–35% (higher LTV = higher risk) |
| Min credit score | 700–720 (lender-dependent) |
| Reserves | 12 months PITIA (vs. 6 on standard DSCR) |
| Max loan amount | $2M–$3M on most programs |
| Property types | SFR, 2–4 units, STR (case-by-case) |
| Rate premium | 0.50%–1.50% above standard DSCR rates |
Why California Investors Use Sub-1.0 Programs
The appreciation play: Bay Area and coastal properties have historically appreciated significantly over time; investors accept negative cash flow in exchange for equity gain. The value-add opportunity: buy under-rented, renovate, raise rents to push DSCR above 1.0 within 12–24 months. STR conversion: long-term rent doesn’t support the DSCR, but converting to Airbnb where STR income would push DSCR above 1.25 changes the math. 1031 exchange deadline: investor must close in a 45-day identification window; sub-1.0 is the only available financing.
How to Improve DSCR Before Applying
Increase your down payment to reduce the PITIA. Use a 40-year interest-only loan to minimize the monthly payment. Use STR income projections via AirDNA if the property is vacation-rental eligible. Negotiate a seller credit to buy down the rate.
Frequently Asked Questions — Sub-1.0 DSCR Loans California
What is a sub-1.0 DSCR loan and how does it work in California?
A sub-1.0 DSCR loan (also called a no-ratio DSCR loan) is a program that allows financing of investment properties where the rental income does not fully cover the mortgage payment. Standard DSCR programs require the rent divided by PITIA to equal at least 1.0 — meaning rent covers 100% of the payment. Sub-1.0 programs accept ratios as low as 0.75 (rent covers 75% of the payment). These programs are particularly common in California’s coastal markets where purchase prices are high relative to achievable long-term rents. The trade-off for the lender accepting a negative-cash-flow property is higher down payment (30–35%), higher credit score requirements (700–720+), more reserves (12 months), and a rate premium above standard DSCR pricing.
Can I use short-term rental income to qualify for a sub-1.0 DSCR loan in California?
Yes — some DSCR lenders will use short-term rental income projections from services like AirDNA to calculate DSCR instead of (or in addition to) long-term market rent. If a property’s long-term rent produces a sub-1.0 DSCR but its projected STR income would push the DSCR to 1.0 or above, some lenders will use the STR figure to qualify. This is case-by-case and lender-specific. The property must be in a location where STR is legal and practical, the appraiser must support the STR income projection, and the lender must have a program that accepts STR income. Call me and I’ll tell you which program fits your specific property.
Is a sub-1.0 DSCR loan a good idea for California real estate investing?
It depends entirely on your investment thesis and holding period. A sub-1.0 DSCR loan makes sense when: you’re buying for appreciation in a market with strong historical value growth; you have a credible plan to raise rents (value-add renovation, STR conversion) within 12–24 months; or you’re in a 1031 exchange with a 45-day identification deadline and no better option. It does not make sense for investors who need immediate positive cash flow, who have limited reserves to cover the monthly shortfall, or who plan to sell within 2–3 years without significant appreciation upside. Run the full cash flow model — including monthly shortfall, holding costs, and expected appreciation — before committing.
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
