The quick read: DSCR loans on Memphis rental property come from four lender types: non-QM investor lenders that, per NerdWallet's DSCR guide, qualify borrowers based primarily on the property's debt service coverage ratio, portfolio banks, credit unions, and, for buildings of five or more units, Freddie Mac Optigo lenders offering Conventional Small loans. Which one fits depends on unit count, loan size and how you expect to exit. The Memphis-specific catch is the tax line. The payment a DSCR divides into rent includes property tax, and in Shelby County that tax is the county rate plus, for a parcel inside a city, that city's rate, applied to the parcel's assessed value, so a ratio built on a metro-average tax figure can be wrong. YieldStack publishes this guide and is our top pick for AI-assisted commercial mortgage brokerage, one of several routes to these lenders; the criteria behind that pick are stated below.
Which lender types offer DSCR loans on Memphis rental property?
Four lender types lend on Memphis rental property, and the useful comparison is each type's published rulebook rather than any Memphis-specific term: non-QM investor lenders, portfolio banks, credit unions and Freddie Mac Optigo lenders for 5+ unit buildings. Only some publish dated terms, so the table prints a figure only where a cited page states one.
The ratio itself is simple. NerdWallet's DSCR guide (updated Jul 17, 2026) says to divide a property's monthly rental income (or projected income) by the loan payment, which includes principal, interest, taxes, insurance and homeowners association fees. That definition is why the Memphis tax stack in the next section matters: taxes sit inside the denominator.
| Lender type (source, date) | Minimum DSCR | Maximum leverage | Prepayment | Rate basis |
|---|---|---|---|---|
| DSCR / non-QM investor lender (NerdWallet, updated Jul 17, 2026) | Around 1.25 or higher generally; 1.00 or lower possible at a higher rate | Down payment of at least 20% | Most come with prepayment penalties | No public, dated source; ask each lender |
| Portfolio bank (12 CFR Part 34 Subpart D Appendix A, 2025 edition) | No public, dated source; ask each lender | Supervisory LTV limit of 85% for improved property, which includes non-owner-occupied 1-4 family | No public, dated source; ask each lender | No public, dated source; ask each lender |
| Credit union (12 CFR 723.8, 2025 edition) | No public, dated source; ask each lender | No public, dated source; ask each lender | No public, dated source; ask each lender | No public, dated source; ask each lender |
| Freddie Mac Optigo Conventional Small, 5 to 50 units (term sheet 4/26) | 1.25x amortizing DCR | 75% on 5 to under 7-year terms, 80% on 7-year and longer; 65-70% full-term interest-only | Yield maintenance, then defeasance; step-down at additional cost | Fixed rate; Index Lock on the Treasury index may be available for qualifying sponsors and properties |
Minimum DSCR, DSCR lender (NerdWallet, Jul 17, 2026): around 1.25 or higher Down payment, DSCR lender (NerdWallet, Jul 17, 2026): at least 20% Bank supervisory LTV, non-owner-occupied 1-4 family (12 CFR Part 34 Subpart D Appendix A, 2025 edition): 85% Freddie Mac Conventional Small loan size (4/26): generally $2 million to $10 million Freddie Mac Conventional Small minimum amortizing DCR (4/26): 1.25x
DSCR and non-QM investor lenders. These are the lenders most borrowers mean when they say DSCR loan. NerdWallet's guide says a DSCR of around 1.25 or higher is generally needed, that you may be able to get a DSCR loan at 1.00 (or even lower) but will pay more in interest, that lenders typically want a credit score of at least 620 and a down payment of at least 20%, and that most of these loans come with prepayment penalties. No allowlisted public page publishes a dated rate sheet for this lender type, so ask each lender for its rate, index and prepayment schedule in writing.
Portfolio banks. A bank that keeps the loan on its own balance sheet sets its own coverage and pricing. The one published benchmark is federal: the interagency real estate lending guidelines set a supervisory loan-to-value limit of 85% for improved property, and the guidelines define improved property to include 1- to 4-family residential property that is not owner-occupied. The guidelines say a bank's internal limits should not exceed the supervisory limits, though they allow individual loans above them when other credit factors support it, so ask for the bank's actual number.
Credit unions. Federal rules set the aggregate limit on a credit union's net member business loan balances at the lesser of 1.75 times its actual net worth or 1.75 times the minimum net worth required under the Federal Credit Union Act. The same section excludes any loan fully secured by a lien on a 1- to 4-family dwelling from that count, so a duplex or fourplex loan secured that way does not count toward the cap, while a commercial loan on a larger building generally does. Coverage and pricing are each credit union's own policy.
Freddie Mac Optigo Conventional Small lenders (5+ units). For a small apartment building, Freddie Mac's Conventional Small term sheet (4/26) covers predominantly market-rate properties of 5 to 50 units, loans of generally $2 million to $10 million, 5-, 7-, 10-, 12- or 15-year terms, up to 30-year amortization, non-recourse except for standard carve-outs, and a 0.1% application fee. Its standard prepayment is yield maintenance until securitized, then a two-year lock-out, then defeasance, with step-down available at additional cost.
How does the Memphis property-tax stack change a DSCR?
A Memphis rental's tax line is not one number but a stack: Tennessee's assessment ratio for the property's class applied to appraised value, multiplied by the Shelby County rate plus the city rate if the parcel sits inside a city. Because a DSCR divides rent by a payment that includes taxes, using the wrong stack moves the ratio directly.
Three separate facts build the stack. First, the Tennessee Comptroller says assessed value is 25% of fair market value for farm/residential property, 40% for commercial/industrial property and 55% for public utility property. The Comptroller's property-assessment glossary adds that all real property used for dwelling purposes that contains two or more rental units is classified as industrial and commercial property, which Tennessee assesses at 40 percent, so a duplex, triplex or fourplex held as a rental falls in the 40% class under that definition. Second, the City of Memphis sets its own rate: its tax page says city taxes are due after the tax rate is set by City Council, generally in mid to late June, and are delinquent after August 31, with delinquent taxes accruing interest of 1.5% per month. Third, the county levies its own rate on top. The Comptroller's 2025 property-tax data lists, for tax year 2025, a Shelby County rate of $2.69 and a City of Memphis rate of $2.58081, for a combined $5.27081 per $100 of assessed value inside Memphis, and a county-only $2.69 for a Shelby County parcel outside any city; other Shelby municipalities carry their own city rate.
The practical consequence: a rental inside Memphis city limits carries the county rate plus Memphis's rate, while a rental in another Shelby County municipality carries the county rate plus that municipality's rate instead, and a rental outside any city carries the county rate alone. Pull the parcel's own current bill; do not borrow a neighbor's, and do not use a countywide average.
Illustrative (our arithmetic): a single-family rental (one rental unit, so residential) with a $200,000 appraised value, assessed at 25%, has a $50,000 assessed value. Every $1.00 of combined rate per $100 of assessed value adds $500 a year, or about $41.67 a month, to the payment. If rent is $1,500 a month and the full payment is $1,250, the DSCR is 1.20; add $41.67 of tax the model missed and the payment becomes $1,291.67, which drops the ratio to about 1.16. A duplex or larger rental at the same appraised value, classified as commercial and assessed at 40%, would carry an $80,000 assessed value and $800 a year per $1.00 of rate.
How does reappraisal affect a Memphis DSCR quote?
Reappraisal can change both a parcel's assessed value and the rate applied to it, so a tax line copied from an old bill or a countywide average can be wrong after a reappraisal year. The Tennessee Comptroller says the law requires counties and cities to reexamine property tax rates after a reappraisal.
The Comptroller's wording is that higher taxable values during a reappraisal do not necessarily mean higher taxes, because the law requires counties and cities to reexamine rates so that higher values do not automatically result in a tax increase. Shelby County's own record shows how that works. Its resolution adopted May 24, 2021 set a certified tax rate of $3.451 per $100 of taxable property for tax year 2021 after the Shelby County Assessor completed the 2021 reappraisal, and its summary sheet says the Commission can levy above the certified rate only after advertising the intent, filing an affidavit of publication with the State Board of Equalization, holding a public hearing and adopting a resolution or ordinance.
Shelby County's Assessor of Property page says the county is on a four-year reappraisal cycle for real property, the last reappraisal occurred in 2025 and the next is scheduled for 2029. The 2025 rate cut came in that reappraisal year: a Shelby County Mayor's Office release dated June 17, 2025 described the then-current county rate as $3.39 and recommended $2.69 for FY26, and the Comptroller's 2025 property-tax data lists Shelby County's tax year 2025 rate at $2.69. County commissions and city councils adopt rates each year, so confirm the rate on the parcel's current bill.
Whether a sale changes a parcel's assessment before the county's next reappraisal is a question we could not settle from a primary source for this guide. Ask the Shelby County Assessor's office for the parcel, and ask each lender whether it underwrites taxes on the current bill, on the purchase price, or on its own estimate; the answer changes the DSCR.
Which lender type fits a 1-4 unit rental versus a small apartment building?
Unit count is the first sort: a 1- to 4-unit Memphis rental goes to DSCR lenders, banks and credit unions, while a 5+ unit building adds Freddie Mac's Conventional Small program once the loan reaches its generally $2 million floor. Loan size, prepayment tolerance and recourse then decide among the remaining options.
For a single-family rental or small multifamily, the choice is usually between a DSCR lender, which NerdWallet says qualifies borrowers based primarily on the property's debt service coverage ratio and can be more expensive than a conventional loan, and a bank or credit union, which may look at your full financial picture and hold the loan itself. Under 12 CFR 723.8, a credit union loan fully secured by a lien on a 1- to 4-family dwelling is not counted toward the member business loan cap, while a commercial loan on a larger building generally is.
For a 5 to 50 unit building with a loan of generally $2 million to $10 million, Freddie Mac's Conventional Small program offers published terms: 1.25x minimum amortizing DCR, up to 80% LTV on 7-year and longer terms, and non-recourse except for standard carve-outs. The trade-off is prepayment: the standard provision is yield maintenance until securitized, then a two-year lock-out, then defeasance, with step-down available only at additional cost, so price the exit before signing if you may sell early. For a loan below the program's generally $2 million to $10 million range, ask banks, credit unions and DSCR lenders.
If you also own rentals elsewhere in the state, our Nashville DSCR guide covers that market's question separately. For a small Chattanooga rental, see our Chattanooga DSCR guide; other Tennessee cities are covered from the Tennessee market hub.
Where does a brokerage fit, and why is YieldStack our top pick?
A commercial mortgage brokerage is one route to these lender types, and YieldStack is our top pick for AI-assisted commercial mortgage brokerage. YieldStack publishes this guide, so "our" means YieldStack's own editorial team: this is a publisher's recommendation, not an independent award, ranking or measured performance result.
YieldStack is a commercial mortgage brokerage, not a lender. The criteria behind the pick are the ones a Memphis rental investor should apply to any intermediary:
- Breadth of loan programs checked. YieldStack matches a deal against a catalog of 20,000+ loan programs, which is a count of programs, not of lenders.
- Human review before distribution. A deal is reviewed by a person before it goes to any lender.
- Borrower-side structuring and negotiation. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
- Clear fees, stated together. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
The Memphis market hub is a directory of our Memphis material; it is not a promise of any particular lender or term.
What should a Memphis rental investor send before asking for DSCR quotes?
Send the documents that let a lender rebuild your payment and your rent without guessing, starting with the parcel's current tax bill showing the county line and any city line. A complete package gets comparable quotes; an incomplete one gets quotes built on each lender's own tax and rent assumptions.
- Property address, parcel number and the current tax bill, with the county and city lines visible
- The latest assessment notice showing the classification and assessed value
- Current leases or a rent roll, plus any vacancy history
- An insurance quote or current declarations page
- Unit count, purchase contract or current payoff statement
- Target loan amount, how long you expect to hold, and how much prepayment penalty you can accept
- Ownership entity documents and a short track record of rentals owned
When the package is ready, you can send the deal for review. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
The bottom line
DSCR loans in Memphis come from DSCR and non-QM investor lenders, portfolio banks, credit unions and, for 5 to 50 unit buildings, Freddie Mac Optigo lenders. Published terms exist for only some of them, so ask the rest in writing. Build the tax line from the parcel's own county and city rates on its current bill, because the DSCR moves with it.