DSCR Loans in Maryland: Investor's Guide to Rental Property Financing

Maryland's proximity to Washington, D.C., strong job market, and diverse communities make it an attractive state for real estate investors. Whether you're targeting Baltimore's cash-flowing multifamily properties, suburban D.C. markets with government worker tenants, or college towns like College Park, DSCR (Debt Service Coverage Ratio) loans offer a streamlined financing option based on property income rather than personal income documentation.

Maryland Real Estate Market Overview

Maryland's real estate market is defined by its proximity to Washington, D.C. and the federal government employment base. The state has distinct market segments: expensive D.C. suburbs (Montgomery County, Howard County), more affordable Baltimore metro, and rural areas on the Eastern Shore and Western Maryland.

Median home prices vary dramatically by location. Montgomery County (Bethesda, Silver Spring, Rockville) runs $500,000-$700,000+. Howard County (Columbia, Ellicott City) is similar at $450,000-$650,000. Baltimore City median is $240,000-$320,000 (but varies wildly by neighborhood). Baltimore County suburbs run $280,000-$420,000. Prince George's County ranges from $300,000-$450,000.

Maryland's economy is heavily influenced by federal government employment, defense contractors, healthcare, biotech, higher education, and the Port of Baltimore. Major employers include the federal government (NIH, NSA, Social Security Administration), Johns Hopkins, Lockheed Martin, Northrop Grumman, and the University of Maryland. The economy is stable and recession-resistant due to government employment.

Population growth is concentrated in the D.C. suburbs and Howard County, while Baltimore City has experienced population decline (though some neighborhoods are gentrifying). The state's overall population is stable with modest growth.

Rental vacancy rates in strong markets are low (4-6%). Cap rates on single-family rentals typically range from 5-8%, with Baltimore offering higher cap rates (8-10%) than D.C. suburbs (5-7%). D.C. suburbs trade lower cash flow for stronger appreciation and tenant quality.

Maryland is moderately landlord-friendly. Eviction processes typically take 45-75 days. Some jurisdictions (Montgomery County, Baltimore City) have tenant-favorable ordinances including just-cause eviction requirements and rent increase limits. Security deposits are capped at two months' rent. Property taxes vary widely by county, averaging 1.04% statewide.

DSCR Loan Requirements in Maryland

DSCR loans in Maryland follow standard parameters, though the state's higher property values in D.C. suburbs impact down payment requirements.

Minimum DSCR Ratio: Lenders typically require 1.0 minimum (rental income equals debt service), with 1.2+ preferred for better rates. In Baltimore and more affordable areas, achieving 1.25+ is realistic. In expensive D.C. suburbs, you may be closer to 1.0-1.15 due to high property prices relative to rents. Lenders understand Maryland's market dynamics and price accordingly.

Down Payment: Standard down payments are 20-25%. In Montgomery County where properties might cost $550,000, you're looking at $110,000-$137,500 down. In Baltimore where properties might cost $220,000, you need $44,000-$55,000. Some lenders offer 15% down if DSCR exceeds 1.25 and you have strong credit and reserves.

Credit Score: Minimum credit scores typically start at 620-640, though 680+ unlocks better rates and more lender options. Given Maryland's higher property values, lenders may favor 700+ credit scores for larger loans.

Property Requirements: The property must be investment-ready, 1-4 units, in decent condition. Maryland has many older rowhomes and townhomes (especially in Baltimore), which are acceptable if major systems are functional. Properties needing major rehab won't qualify.

Location Considerations: Some DSCR lenders are cautious about certain Baltimore City neighborhoods due to vacancy and crime concerns. Properties in stable Baltimore neighborhoods (Canton, Federal Hill, Hampden, Roland Park) or suburbs are straightforward. D.C. suburbs are highly desirable to lenders. Eastern Shore and rural Western Maryland may have limited rental comps, making appraisals challenging.

Appraisal and Rent Assessment: Lenders order an appraisal with rental income analysis. In Maryland, rental comps are generally plentiful in urban and suburban areas. The appraiser's rental estimate determines your DSCR. In D.C. suburbs, appraisers are very familiar with rental markets. In rural areas, comps may be scarce, potentially leading to conservative rent estimates.

Loan Limits: Most DSCR lenders have maximums of $3-4 million and minimums of $75,000-$100,000. Maryland's property values mean you'll typically be well above minimums, and D.C. suburb properties can approach or exceed maximums.

Interest Rates: DSCR loans run approximately 1-2% higher than conventional owner-occupied mortgages. In early 2026, expect rates of 7.5-8.5% depending on DSCR, credit, down payment, and property location. Properties in desirable D.C. suburbs may get slightly better rates than properties in transitional Baltimore neighborhoods.

Best Cities and Markets for DSCR Investment in Maryland

Baltimore City: The highest cash flow potential in Maryland. Median prices $240,000-$320,000, but vary enormously by neighborhood. Strong neighborhoods include Canton ($350,000-$500,000 for renovated rowhomes, rent $2,200-$2,800), Federal Hill (similar pricing and rents), Hampden ($250,000-$380,000, rent $1,600-$2,200), and Remington (gentrifying, $220,000-$320,000, rent $1,500-$2,000). Target rowhomes and small multifamily properties. Avoid neighborhoods with high vacancy and crime unless very experienced. Hopkins students and young professionals create steady demand.

Prince George's County (College Park, Hyattsville, Bowie): More affordable access to D.C. job market. College Park has University of Maryland (40,000+ students)—strong student rental demand. Median prices $300,000-$400,000. 3-bedroom homes near campus rent $2,200-$2,800. Hyattsville is gentrifying with D.C. spillover. Bowie is suburban with families. Good balance of cash flow and appreciation potential.

Montgomery County (Silver Spring, Rockville, Germantown): Expensive but stable with high-quality tenants (federal workers, contractors). Median prices $500,000-$700,000. 3-bedroom townhomes rent $2,500-$3,200. Cash flow is tight but tenant quality and appreciation are strong. Germantown is the most affordable part of MoCo ($400,000-$550,000). Target townhomes and condos—single-family homes are often $800,000+.

Howard County (Columbia, Ellicott City): Excellent schools, high-income residents, very stable market. Median prices $450,000-$650,000. 3-bedroom townhomes rent $2,400-$3,000. Similar to Montgomery County—tight cash flow but strong fundamentals. Columbia's village structure creates diverse housing stock including many townhomes suitable for DSCR investment.

Baltimore County (Towson, Dundalk, Essex, Catonsville): Mix of markets. Towson (near Towson University) has student and professional demand; median $320,000-$420,000, rents $1,800-$2,400. Dundalk and Essex are working-class with lower prices ($180,000-$260,000) and rents ($1,300-$1,700). Catonsville is middle-class suburban with UMBC student demand; median $280,000-$380,000, rents $1,600-$2,100.

Frederick: Growing city in the I-270 biotech corridor. Median prices $350,000-$480,000. Good balance between D.C. access and affordability. 3-bedroom homes rent $2,000-$2,600. Population is growing; downtown Frederick is walkable and attractive.

Annapolis and Anne Arundel County: State capital with Naval Academy and good schools. Median prices $400,000-$550,000. 3-bedroom homes rent $2,200-$2,800. Stable market with government and military demand. Glen Burnie is more affordable ($280,000-$380,000).

Hagerstown: Most affordable market in the state. Median prices $190,000-$250,000. Working-class city with some D.C. exurban demand. 3-bedroom homes rent $1,200-$1,600. Strong cash flow potential but limited appreciation. Good for investors seeking maximum cash flow.

Property Types That Work Best

Baltimore Rowhomes: The iconic Maryland investment property. 2-3 story rowhomes in Baltimore offer excellent cash flow. A renovated Canton rowhome might cost $380,000 and rent for $2,400 (tight but workable DSCR); a Hampden rowhome might cost $280,000 and rent for $1,800 (strong DSCR). Many investors love rowhomes because they're affordable, tenants like the character, and there's no lawn maintenance.

Townhomes (D.C. Suburbs): In Montgomery, Howard, and Prince George's counties, townhomes are often the most affordable entry point. A 3-bedroom townhome in Germantown costing $450,000 renting for $2,600 can work with 20-25% down. HOA fees ($150-$300/month) will count against DSCR, so factor carefully.

Single-Family Homes (3-4 bedrooms): In more affordable markets like Baltimore County, Hagerstown, or parts of Prince George's County, single-family homes can generate strong cash flow. In D.C. suburbs, SFHs are often too expensive for rental investors unless you're targeting very high-end tenants.

Small Multifamily (2-4 units): Baltimore has many duplexes and small apartment buildings. These can be excellent DSCR properties. A duplex in Hampden with each unit renting for $1,400 ($2,800 total) might cost $320,000, creating a strong DSCR. Multifamily spreads vacancy risk and can generate serious cash flow.

Condos: Available in urban areas (Baltimore, Silver Spring, Rockville) and some suburban developments. HOA fees can be high ($250-$400+/month in high-rise buildings), which will impact DSCR. Target lower-fee buildings and run the numbers carefully.

Properties to Avoid: Properties in high-crime Baltimore neighborhoods (check crime stats carefully), properties needing major systems replacement, very rural properties with limited rental demand, properties with significant deferred maintenance, and properties in declining industrial towns.

Maryland Tax Considerations for DSCR Investors

Property Taxes: Maryland property tax rates average 1.04% statewide, but vary significantly by jurisdiction. Baltimore City is 2.25% (very high). Baltimore County is 1.10%. Montgomery County is 0.87%. Howard County is 1.01%. Prince George's County is 1.05%. Anne Arundel County is 0.84%. Always verify exact property taxes—they're included in your monthly debt service calculation. A $300,000 Baltimore City property has $6,750 annual taxes ($563/month); the same value in Montgomery County has $2,610 annual taxes ($218/month). This dramatically impacts DSCR calculations.

State Income Tax: Maryland has a graduated income tax from 2% to 5.75% (plus local county taxes ranging from 2.25% to 3.20%), creating a combined top rate around 8.95%—among the highest in the nation. Rental income is taxable, but you can deduct all ordinary expenses: mortgage interest, property taxes, insurance, repairs, maintenance, property management, depreciation, and travel. Maryland's high income tax makes maximizing deductions important.

County Income Tax: Maryland is unique in having separate county income taxes on top of state tax. Montgomery County adds 3.20%, Baltimore City adds 3.05%, other counties range from 2.25%-3.20%. This increases your total tax burden on rental income.

Transfer and Recordation Taxes: Maryland has significant real estate transfer costs. The state recordation tax is 0.5% of the purchase price. Counties add their own: Montgomery County adds 1.0%, Baltimore City adds 1.5%, most other counties add 0.5-1.0%. Total transfer/recordation taxes can reach 2-2.5% of purchase price. On a $300,000 purchase, you might pay $6,000-$7,500 in transfer taxes. This is factored into your purchase costs, not ongoing DSCR calculations, but significantly impacts your total investment.

1031 Exchanges: Maryland follows federal 1031 exchange rules. You can sell a Maryland rental property and defer capital gains by purchasing another investment property within required timeframes. Given Maryland's high transfer taxes, 1031 exchanges can be particularly valuable to avoid sale-related taxes.

Depreciation: Federal tax law allows residential rental depreciation over 27.5 years. On a $300,000 property with $60,000 allocated to land, you'd depreciate $240,000 over 27.5 years, creating approximately $8,727 in annual depreciation deductions. Given Maryland's high combined state and local income tax, depreciation provides significant tax savings.

LLC Structure: Many Maryland investors hold properties in LLCs for liability protection. Maryland charges $100 to form an LLC and $300 annually to file (one of the highest annual fees in the nation). Despite the cost, most investors use LLCs for asset protection. DSCR lenders will lend to LLCs for established borrowers.

Homestead Tax Credit: Maryland offers property tax credits for owner-occupied homes, but these don't apply to investment properties. Your rental properties are taxed at full rates.

Frequently Asked Questions

Should I invest in Baltimore or the D.C. suburbs for DSCR loans?

It depends on your strategy. Baltimore offers better cash flow—you can achieve 1.25+ DSCR more easily, and cap rates are higher (8-10% vs. 5-7%). However, property management is more intensive, and some neighborhoods have higher risk. D.C. suburbs (Montgomery, Howard, Prince George's counties) offer lower cash flow and tighter DSCR ratios but much higher tenant quality, easier management, and stronger appreciation. Most investors focused purely on cash flow choose Baltimore; those focused on appreciation and tenant quality choose D.C. suburbs.

How do Maryland's high transfer taxes affect DSCR investment returns?

Maryland's 1.5-2.5% combined transfer and recordation taxes increase your upfront costs significantly. On a $300,000 purchase, you might pay $6,000-$7,500 in transfer taxes on top of your down payment and closing costs. This doesn't directly affect DSCR calculations, but it means you need to hold properties longer to recoup these costs. Plan to hold Maryland properties at least 5-7 years to make the transfer taxes worthwhile. If you're flipping frequently, Maryland is expensive. If you're buying and holding long-term, the strong rental market compensates.

Are DSCR loans available for Baltimore rowhomes?

Absolutely. Baltimore rowhomes are a staple of Maryland DSCR investing. Lenders are very familiar with rowhomes and finance them regularly. The key is buying in a stable neighborhood with strong rental comps. Canton, Federal Hill, Hampden, Fells Point, and similar neighborhoods have plenty of rental comps for appraisers. Avoid transitional or declining neighborhoods unless you're experienced—some lenders will be more cautious in those areas.

Can I use a DSCR loan for a property near UMD College Park for student housing?

Yes. College Park has strong rental demand from University of Maryland students. A 4-bedroom home near campus can be rented by the room to students for $2,400-$3,200 total monthly rent. DSCR lenders will finance these properties using the appraiser's rental estimate for a traditional long-term lease (not by-the-room rent, though the total works out similarly). Be aware that student rentals have higher turnover and wear-and-tear, so budget for more maintenance and vacancy.

What happens to my DSCR loan if I get a job with the federal government and move to Maryland?

DSCR loans are for non-owner-occupied investment properties. If you take a federal job and move to Maryland, you cannot move into your DSCR-financed property—it must remain a rental. You'd need to rent somewhere else to live while your DSCR property generates rental income. If you wanted to live in a property you purchased, you'd need owner-occupied financing (conventional, FHA, etc.), not a DSCR loan.

The Bottom Line on Maryland DSCR Loans

Maryland offers real estate investors two distinct strategies: cash-flowing properties in Baltimore and more expensive appreciation-focused properties in D.C. suburbs. DSCR loans work well in both markets, allowing you to qualify based on rental income rather than personal income documentation.

For maximum cash flow, target Baltimore neighborhoods with strong fundamentals (Canton, Federal Hill, Hampden, Roland Park), Baltimore County areas near Towson, or affordable markets like Hagerstown. You can achieve 1.25+ DSCR and 8-10% cap rates in these areas. For maximum tenant quality and appreciation, target D.C. suburbs (Montgomery, Howard, Prince George's counties), accepting tighter cash flow (1.0-1.15 DSCR, 5-7% cap rates) in exchange for government worker tenants and strong long-term appreciation.

Calculate your DSCR conservatively. Maryland's property taxes vary enormously—Baltimore City's 2.25% rate versus Montgomery County's 0.87% can swing your cash flow by hundreds of dollars monthly. Get actual property tax bills, actual insurance quotes, and realistic rental estimates from recent comps. Factor in 6-8% vacancy (Maryland markets are strong but not immune), 1% of property value for annual maintenance, and 8-10% for professional property management if not self-managing.

Budget for Maryland's high transfer taxes (1.5-2.5% of purchase price) and annual LLC fees ($300) in your total investment calculations. Plan to hold properties long-term to amortize these costs.

DSCR loans cost more than conventional financing (1-2% higher rates), but they offer speed, simplicity, and scalability. You can close in 30-45 days without providing tax returns or W-2s. This is particularly valuable for self-employed investors, business owners, or federal contractors with complex income structures. For Maryland investors building rental portfolios in markets with strong government employment and stable fundamentals, DSCR loans are an effective financing tool that trades slightly higher rates for dramatically simpler underwriting.