DSCR Loan Example and Rental Property Checklist for Michigan Investors
Will the rent support the proposed loan—and will the property still work after expenses? Those are two different questions. Use this guide to prepare a clearer conversation about financing a rental.
Guidance from Mike Alkema, NMLS #642953 · Leeward Point Mortgage LLC, Company NMLS #1823590. The examples below are hypothetical, not client results, lender quotes or approval requirements.
Start with the lender's definition of DSCR
Debt-service coverage ratio compares accepted rental income with the housing expense specified by the lender. Confirm whether that expense includes principal, interest, property taxes, insurance and association dues. Also confirm whether accepted rent comes from an existing lease, an appraiser's market-rent estimate or another permitted source.
Example: $2,400 in accepted monthly rent divided by $2,000 in qualifying monthly housing expense produces a ratio of 1.20. A lender's required ratio and other eligibility rules vary. A 1.20 ratio alone is not an approval.
Stress-test the same property
| Accepted monthly rent | Illustrative ratio |
|---|---|
| $2,400 | 1.20 |
| $2,200 | 1.10 |
| $2,000 | 1.00 |
If the accepted rent stays at $2,400 but qualifying housing expense rises to $2,200, the ratio falls to about 1.09. Use property-specific taxes, insurance and dues; a listing's old tax bill may not represent your future expense.
Why a Michigan rental’s tax estimate needs a fresh look
Michigan Treasury explains that a qualifying transfer of ownership generally uncaps taxable value in the following calendar year. Some transfers are exempt. A seller’s current tax bill therefore may not be a reliable estimate of the buyer’s future taxes. Confirm the parcel’s circumstances with the local assessor before relying on the listing figure.
Michigan Treasury: changes in ownership and taxable-value uncapping.
Hypothetical sensitivity check: If accepted rent is $2,400 and the lender’s qualifying expense is $2,000, the ratio is 1.20. If a revised tax estimate adds $150 per month to that expense, the ratio becomes $2,400 ÷ $2,150, or about 1.12. This is arithmetic using assumed figures, not a tax assessment, lender quote or approval threshold.
Ask which tax and insurance estimates the lender will use, and put the same revised figures into your operating budget. The loan calculation and your investment budget should both reflect the property you intend to buy.
A loan ratio is not your investment profit
In the first example, rent minus qualifying housing expense leaves $400 per month before other costs. If you separately budget $120 for vacancy, $120 for repairs and $192 for management, those illustrative allowances total $432—leaving a $32 shortfall before additional expenses. These are planning assumptions, not a lender calculation.
Build a separate operating budget for vacancy, maintenance, major repairs, utilities you pay, management and local requirements. Do not treat a qualifying ratio as proof that the property will be profitable.
Bring these facts to the first conversation
- Property address or community, purchase price and proposed down payment.
- Long-term or short-term rental plan, expected rent and whether a lease exists.
- Estimated taxes, insurance, association dues and other owner-paid expenses.
- Whether title would be held personally or in an eligible entity.
- Your intended holding period and whether you expect to refinance or sell.
A general scenario is enough to start. Do not put leases containing tenant information, account numbers or financial records in a general contact form. Mike will explain the approved secure document channel.
Questions to settle before accepting a quote
- Which rental-income source and expense definition will the lender use?
- What down payment, credit, property and reserve requirements apply?
- Is the proposed ownership structure permitted, and are guarantees required?
- Does the proposal include prepayment provisions that affect your exit plan?
- How do the loan's payment, fees and cash requirements compare with conventional investor financing?
For short-term rentals, confirm local permission, insurance and the lender's accepted income method separately. Loan eligibility does not grant permission to rent.
DSCR or conventional financing?
If personal-income documentation supports conventional investment-property financing, compare both routes using the same property and loan assumptions. If the challenge is business-income documentation for another transaction, review bank statement mortgages and self-employed mortgage options.
DSCR loan options, costs and ownership considerations · Investment-property financing
Talk through the property before choosing the loan
Tell Mike where you are buying, the rent you expect and what you want to accomplish. The next step is a property-specific comparison, not a promise based on one number.
Ask Mike about a rental property Call 616-319-1640
Sources and further reading
UWM investor and alternative-documentation product information. This is one lender's information, not a universal program standard.
Reviewed October 1, 2026. Educational information only, not an approval or commitment to lend. Programs, terms, rates and eligibility depend on the borrower, property and lender and remain subject to underwriting. Equal Housing Opportunity.