DSCR Loans in Killeen: Fort Hood Military Housing & Investment Financing

Killeen's real estate market is defined by one dominant factor: Fort Hood (recently renamed Fort Cavazos), the largest active-duty armored post in the U.S. Armed Forces. With 36,000+ active-duty soldiers plus thousands of civilian employees and family members, Killeen offers real estate investors unmatched rental demand stability—and DSCR loans make it accessible without traditional income verification.

Understanding DSCR Loans

Debt Service Coverage Ratio (DSCR) loans are investment property mortgages that qualify borrowers based on rental income rather than personal income, tax returns, or employment documentation.

DSCR calculation:

Monthly Rent ÷ Monthly Payment (PITIA) = DSCR

• 1.0 DSCR: Rent covers mortgage exactly
• 1.25+ DSCR: Strong performance, best rates
• <1.0 DSCR: Possible with larger down payment

For Killeen investors targeting military housing—where tenant reliability is high but rental rates are capped by BAH (Basic Allowance for Housing)—DSCR loans offer qualification based on property performance, not personal finances.

Why Killeen Investors Choose DSCR Loans

1. Fort Hood (Fort Cavazos) Military Demand

Fort Hood is the military's premier armored post:

• 36,000+ active-duty soldiers
• III Corps and First Army Division West headquarters
• 8,800+ civilian employees
• 60,000+ family members (when including dependents)
• Economic impact: $14+ billion annually to Central Texas

This creates massive, stable rental housing demand that conventional housing can't fully satisfy.

2. BAH-Backed Rental Income

Military members receive Basic Allowance for Housing (BAH) based on rank, dependent status, and duty station. This creates:

• Guaranteed income: BAH paid directly by U.S. government
• Predictable rates: Published annually, rarely decrease
• Low default risk: Military members face consequences for lease violations
• Long-term tenancies: Typical assignments 2-4 years

BAH ensures your rental income is reliable and government-backed.

3. Extremely Affordable Entry Points

Killeen offers some of Texas's most affordable investment real estate:

• Single-family homes: $140K-$280K
• Townhomes/condos: $120K-$200K
• Duplexes: $180K-$320K

Lower prices mean:

• Smaller down payments (20-25% of $200K vs. $500K elsewhere)
• Easier portfolio scaling
• Lower debt service (easier to achieve strong DSCR)

4. No Personal Income Verification

DSCR loans work perfectly for:

• Military veterans building rental portfolios
• Self-employed contractors serving Fort Hood
• Real estate agents specializing in military housing
• Out-of-state investors targeting military markets

If the property's rent (typically aligned with BAH) covers the mortgage, you qualify—regardless of your personal tax situation.

Killeen Rental Market Breakdown

High-Performing Neighborhoods

Near Fort Hood Gates:

• Clear Creek: $180K-$280K, family-friendly, close to main gate
• Summerlyn: $200K-$320K, newer development, popular with officers
• Bridgewood: $160K-$240K, established, solid rentals
• Redbud: $150K-$230K, affordable, high demand

East Killeen:

• Parkwood: $140K-$220K, workforce housing, consistent demand
• Meadow Glen: $160K-$250K, families, good schools
• Nolan Creek: $180K-$280K, newer homes, amenities

Harker Heights (Adjacent City):

• Indian Oaks: $200K-$320K, upscale for area, officer housing
• Dana Peak: $180K-$280K, Stillhouse Hollow Lake proximity
• Twin Creek: $190K-$300K, family-oriented, excellent schools

Copperas Cove (West Side):

• Cove: $140K-$240K, slightly farther from base, more affordable
• West Gate area: $150K-$230K, convenient to west gate

Rental Income by BAH Alignment

Understanding BAH rates is critical for Killeen investing. 2026 Fort Hood BAH examples:

Enlisted (most common):

• E-4 with dependents: ~$1,350/month
• E-5 with dependents: ~$1,500/month
• E-6 with dependents: ~$1,650/month
• E-7 with dependents: ~$1,800/month

Officers:

• O-1 with dependents: ~$1,500/month
• O-2 with dependents: ~$1,650/month
• O-3 with dependents: ~$1,950/month
• O-4 with dependents: ~$2,250/month

Rental strategy: Price properties at or slightly below BAH for target rank. E-5 through E-7 represents the largest tenant pool.

Typical rental ranges:

• 3BR/2BA (E-5 to E-6 target): $1,400-$1,700/month
• 4BR/2BA (E-6 to E-7 target): $1,600-$2,000/month
• 3BR/2.5BA townhome (E-5 to O-2): $1,500-$1,800/month
• 4BR/3BA (O-3 to O-4): $1,900-$2,400/month

DSCR Loan Requirements in Killeen

Credit Score

• Minimum: 620-640
• Better rates: 680+
• Best rates: 720+

Credit events (foreclosure, bankruptcy) require 2-4 year waiting periods.

Down Payment

• Standard: 20-25%
• DSCR < 1.0: 25-30%
• Multi-unit (2-4 units): 25%
• Cash-out refinance: 25-30% equity

Reserve Requirements

Lenders require 6-12 months of PITIA in liquid reserves:

• Bank accounts
• Investment/brokerage accounts
• Retirement accounts (often 60-70% counted)

Military housing typically requires standard 6-9 month reserves (lower end of range) due to tenant stability.

Property Standards

• Investment property only
• Appraisal with rental income analysis
• Habitable, rent-ready condition
• Standard homeowners insurance
• Must meet basic property condition standards

Calculating DSCR for Killeen Properties

Example 1: E-6 Target Property (Clear Creek)

Property:

• Purchase price: $220,000
• Location: Clear Creek, 10 minutes to main gate
• Layout: 4BR/2BA single-family
• Down payment (25%): $55,000
• Loan amount: $165,000
• Interest rate: 7.5%
• Monthly P&I: $1,154
• Property taxes: $305/month ($3,660/year)
• Insurance: $130/month
• HOA: $0
• Total PITIA: $1,589/month

Target rent (E-6 BAH-aligned): $1,650/month

DSCR = $1,650 ÷ $1,589 = 1.04

Qualifies—military housing often has tighter DSCR margins but high reliability compensates.

Example 2: E-5 Target Townhome (Harker Heights)

Property:

• Purchase price: $180,000
• Layout: 3BR/2.5BA townhome
• Down payment (25%): $45,000
• Loan amount: $135,000
• Rate: 7.5%
• Monthly P&I: $944
• Taxes: $250/month
• Insurance: $110/month
• HOA: $180/month
• Total PITIA: $1,484/month

Target rent (E-5 BAH): $1,500/month

DSCR = $1,500 ÷ $1,484 = 1.01

Barely qualifies—HOA fees can tighten margins. Consider properties without HOAs for better DSCR.

Example 3: Affordable Workforce (Parkwood)

Property:

• Purchase price: $160,000
• Layout: 3BR/2BA
• Down payment (25%): $40,000
• Loan amount: $120,000
• Rate: 7.75%
• Monthly P&I: $862
• Taxes: $225/month
• Insurance: $110/month
• HOA: $0
• Total PITIA: $1,197/month

Market rent (E-4/E-5 range): $1,400/month

DSCR = $1,400 ÷ $1,197 = 1.17

Solid DSCR—affordable properties often deliver better ratios in Killeen market.

Example 4: Officer Housing (Summerlyn)

Property:

• Purchase price: $280,000
• Layout: 4BR/3BA
• Down payment (25%): $70,000
• Loan amount: $210,000
• Rate: 7.5%
• Monthly P&I: $1,468
• Taxes: $390/month
• Insurance: $145/month
• HOA: $0
• Total PITIA: $2,003/month

Target rent (O-3 BAH): $1,950/month

DSCR = $1,950 ÷ $2,003 = 0.97

Does NOT qualify at standard minimums. Options:

• Increase down payment to 30% (lowers PITIA to ~$1,865, DSCR improves to 1.05)
• Target slightly lower price point
• Find property with higher rent potential

Lesson: Officer housing can have tighter margins. Mid-range enlisted (E-5 to E-7) often offers better DSCR.

Interest Rates & Closing Costs

DSCR Rate Expectations (2026)

DSCR loans price 1-2.5% above conventional investment loans:

• Strong scenario (1.25+ DSCR, 720+ credit): 7.0-8.0%
• Standard scenario (1.0-1.24 DSCR, 680-719 credit): 7.5-8.5%
• Compensating factors (<1.0 DSCR, 620-679 credit): 8.5-10.0%

Closing Costs

• Origination: 1-2 points
• Appraisal: $450-$600
• Title insurance: $1,100-$2,000
• Escrow/closing: $500-$900
• Recording: $150-$300
• Miscellaneous: $300-$500

Total: 3-5% of purchase price.

Texas-specific: No state income tax, but property taxes are higher (1.5-1.8% of assessed value annually). Factor this into DSCR calculations.

Step-by-Step DSCR Loan Process

1. Property Search

Work with Killeen military housing specialists who understand:

• BAH rates and target demographics
• Neighborhoods near Fort Hood gates
• Properties that military families prefer
• School district boundaries (important for families)

2. Lender Pre-Qualification

Contact 2-3 DSCR lenders to compare:

• Rate quotes
• Minimum DSCR requirements
• Military market experience
• Prepayment penalties
• Turn times

3. Application

Submit:

• Purchase contract
• Property details
• Credit authorization
• Bank statements (reserves + down payment)
• LLC documents (if applicable)

NOT required:

• Tax returns
• W-2s or income documentation
• Employment verification
• DTI calculations

4. Appraisal & Rental Analysis

Appraiser determines:

• Property value
• Market rent (using local military rental comps)

Military housing comps are plentiful in Killeen, making appraisals straightforward.

5. Underwriting

Underwriter reviews:

• DSCR calculation
• Credit
• Reserves
• Title
• Insurance

6. Closing

• Review closing disclosure
• Wire funds
• Close at title company
• Receive keys and begin tenant search

Timeline: 30-45 days typical.

Military Housing Management Strategy

Understanding Military Tenants

Advantages:

• Guaranteed income: BAH paid by government
• Respectful tenants: Military discipline generally translates to property care
• Long assignments: 2-4 year leases common
• Low default risk: Lease violations can affect military careers
• Clean background: Security clearances mean vetted tenants

Considerations:

• PCS (Permanent Change of Station) moves: Sudden orders (30-60 days notice) mean lease breaks
• Deployment: Spouse may struggle with maintenance issues solo
• Pets: Many military families have pets (consider pet-friendly policies)
• Wear and tear: Large families with kids can be harder on properties

Military Lease Clauses

SCRA (Servicemembers Civil Relief Act):

Federal law allows military members to break leases without penalty if they:

• Receive PCS orders
• Deploy for 90+ days
• Separate from military

Landlord protection:

• Require 30-day written notice
• Request copy of official orders
• Collect rent through notice period

Strategy: Build lease breaks into your investment model (assume slight turnover premium) and screen for quality tenants who maintain properties well.

Marketing to Military Tenants

Where to list:

• MilitaryByOwner.com: Premier military rental site
• AHRN.com: Automated Housing Referral Network (official military site)
• Fort Hood housing office: On-base referral lists
• Facebook groups: Fort Hood spouses groups, PCS groups
• Zillow/Apartments.com: Standard platforms (still effective)

What military families want:

• Proximity to gates: Shorter commute to base
• Good schools: Killeen ISD, Harker Heights schools, Clear Creek ISD
• Pet-friendly: Many families have pets
• Fenced yards: Safety for kids and pets
• Updated/clean: Modern kitchens and baths
• Storage: Garage or shed for military gear

Property Management

DIY management considerations:

• Easier for local investors
• Military tenants generally low-maintenance
• Simple lease structures (align with BAH payment dates—1st or 15th of month)

Professional management:

• Cost: 8-10% monthly + leasing fee (50-100% first month)
• Services: Military tenant screening, lease management, maintenance, PCS coordination
• Best for: Out-of-state investors, multiple properties

Killeen property managers: Many specialize in military housing and understand BAH, SCRA, and Fort Hood tenant needs.

BAH Strategy Tips

Pricing Properties

Align rent with BAH:

• Research current BAH rates for Fort Hood
• Target E-5 through E-7 (largest tenant pool)
• Price at or slightly below BAH (maximizes demand)
• Avoid pricing above BAH (reduces tenant pool significantly)

Example:

• E-6 with dependents: $1,650 BAH
• Your 4BR/2BA property: List at $1,600-$1,650
• Tenant pays entire rent from BAH, no out-of-pocket

Multiple Ranks Strategy

Some investors target specific ranks:

• E-4 to E-6 (junior enlisted): Highest volume, more turnover, lower rents
• E-6 to E-8 (senior enlisted): Large pool, stable, good rents
• O-2 to O-4 (junior officers): Smaller pool, higher rents, excellent tenants

Diversify across ranks to balance volume and quality.

DSCR Loans vs. Alternative Financing

DSCR vs. Conventional Investment Loans

DSCR advantages:

• No income verification
• No DTI limits (scale unlimited properties)
• Faster approval
• Better for self-employed

Conventional advantages:

• Lower rates (1-2% lower)
• Lower down payments possible (15%)
• Better for W-2 employees

DSCR vs. VA Loans (for Veterans)

VA loans work for primary residences (including house-hacking multi-units up to 4 units). For pure investment properties, DSCR loans are the solution.

Strategy: Veterans can use VA for primary residence, then DSCR for additional investment properties.

Building a Killeen Portfolio with DSCR

DSCR loans excel for scaling:

1. No income limits: Your personal income doesn't cap borrowing
2. Consistent qualification: Each property qualifies on its own income
3. LLC-friendly: Entity ownership for liability protection
4. Unlimited properties: No Fannie Mae caps

Sample Portfolio Strategy

Year 1:

• Property 1: Clear Creek 4BR (E-6 target), $220K, $1,650/month
• Cash flow: ~$50/month (tight but builds equity)

Year 2:

• Property 2: Parkwood 3BR (E-5 target), $160K, $1,400/month
• Cash flow: ~$200/month

Year 3:

• Property 3: Harker Heights duplex, $240K, $2,800/month combined
• Cash flow: ~$600/month
• Property 4: Summerlyn 4BR (E-7 target), $250K, $1,800/month
• Cash flow: ~$150/month

Total portfolio:

• 4 properties, 6 units
• ~$7,650/month gross rent
• ~$1,000/month combined cash flow
• Significant equity via appreciation + paydown
• Diversified across neighborhoods and ranks

Common Killeen DSCR Questions

Is Fort Hood being closed or downsized?

No. Fort Hood (now Fort Cavazos) is the Army's largest installation and critical to armored operations. Base realignment is extremely unlikely.

What if BAH rates decrease?

BAH rarely decreases and typically grows 2-3% annually. Even if rates flatten, existing leases lock in rent until renewal.

Do I need to be military to invest in Killeen?

No. DSCR loans are available to any qualified investor. Military experience helps understand tenant needs but isn't required.

Can I use a property manager if I'm out of state?

Yes. Many Killeen investors are remote. Professional management (8-10%) handles everything.

What about SCRA lease breaks?

Build slight turnover buffer into your model (assume one lease break every 2-3 years). Quality property managers handle PCS transitions smoothly.

Are there prepayment penalties?

Some DSCR loans have 3-2-1 step-down penalties. Negotiate if you plan to refinance within 3-5 years.

Can I finance multiple Killeen properties simultaneously?

Yes. Each property qualifies independently based on its own DSCR.

Tips for Killeen DSCR Success

1. Target Mid-Range Enlisted

E-5 through E-7 represents the largest, most stable tenant pool. Avoid chasing high-end officer market (smaller pool, tighter DSCR).

2. Prioritize Location

Properties within 15 minutes of Fort Hood gates rent fastest and command premium rates (within BAH constraints).

3. Pet-Friendly Policies

Many military families have pets. Pet-friendly properties (with pet deposit/rent) expand tenant pool significantly.

4. Understand Texas Property Taxes

Texas has no income tax but high property taxes (1.5-1.8% annually). Factor into DSCR calculations—this is your largest ongoing expense besides mortgage.

5. Build Relationships

• Property managers specializing in military housing
• Real estate agents who understand Fort Hood market
• Contractors familiar with military tenant expectations
• Other military housing investors for market insights

Killeen Market Outlook

Stability Factors

• Fort Hood permanence: Largest armored post, critical infrastructure
• 36,000+ soldiers: Constant rental demand
• Government backing: BAH ensures rent payments
• Economic resilience: Military spending recession-resistant

Growth Potential

• Limited: Killeen is mature military market (not high appreciation)
• Stable: Rents track BAH growth (2-3% annually)
• Cash flow focused: Buy for income, not aggressive appreciation

Investment Advantages

• Extremely affordable entry ($140K-$280K)
• Tenant stability (military assignments)
• Government-backed rent (BAH)
• Low vacancy (high demand, limited supply)
• Predictable income (BAH published annually)

Potential Risks

• Base closure: Extremely unlikely but catastrophic if it occurred
• BAH freeze: Rare but possible during federal budget crises
• Economic limits: Military town with capped rent growth
• Appreciation limits: Not a high-growth market

Mitigation: Diversify across multiple properties, maintain reserves, focus on cash flow over appreciation.

Final Thoughts: Killeen DSCR Investing

Killeen offers real estate investors unmatched tenant stability through Fort Hood's military presence. While appreciation potential is modest compared to Austin or Dallas, the combination of affordable entry points, government-backed rent (BAH), and reliable tenants creates exceptional cash flow opportunities—all accessible through DSCR financing that qualifies you on rental income, not personal finances.

For military veterans, self-employed investors, and portfolio builders seeking stable, predictable returns, Killeen's military housing market delivers—and DSCR loans unlock it without tax return headaches.

Your action plan:

1. Research current Fort Hood BAH rates
2. Identify target neighborhoods and price ranges
3. Calculate DSCR for sample properties
4. Pre-qualify with 2-3 DSCR lenders
5. Partner with military housing specialists (agents/PMs)
6. Execute your first Killeen investment

The Killeen market rewards investors who combine military market knowledge with smart financing—exactly what DSCR loans provide.