DSCR loan in Louisiana: rules, costs and the exemption you lose

Read the seller's tax bill as a warning, not a forecast. Most investors work a Louisiana deal in the wrong order. They take the seller's property tax bill, add an insurance guess, run the rent against the total and get a comfortable ratio.

Then the assessor removes the homestead exemption, the insurer quotes a landlord policy with a wind deductible, and the comfortable ratio shrinks. Neither surprise is hidden. The exemption is written into the state constitution, and the insurance rule is written into state law.

What is a DSCR loan in Louisiana, and how does it work?

A DSCR loan is investment-property financing that qualifies on the property's rent rather than on the borrower's personal income. DSCR stands for debt service coverage ratio, which is the rent divided by the property's full housing cost.

There is no debt-to-income calculation, no pay stub and no tax return driving the approval. The lender looks at what the property earns and at what the property costs to carry. The relationship between those two numbers is the qualification.

Because the owner will not live in the property, the loan is business-purpose credit. Regulation Z exempts an extension of credit primarily for a business, commercial or agricultural purpose at 12 CFR 1026.3(a)(1).

Moreover, the Official Interpretations treat credit on rental property the owner does not occupy as business-purpose. That is comment 3(a)-4. It is a federal rule, so it reads the same in Shreveport as it does in Las Vegas.

The test in that comment is the owner's own use. If the owner expects to live in the property for more than 14 days in the coming year, the rule does not apply. The comment says nothing about relatives. DSCR programs typically add a rule of their own and also bar family members from living in the property.

What Louisiana actually changes

Almost nothing about the arithmetic, and quite a lot about the inputs. The formula is national. The tax figure and the insurance figure inside it are not. Louisiana fixes its assessment percentages in the state constitution and grants a homestead exemption that only an occupying owner can hold.

It sits in a hurricane zone that makes insurance the most volatile line on the file. And it lets New Orleans write its own short-term rental rules. Every one of those lands somewhere in a DSCR calculation.

So the useful way to read the rest of this guide is as a list of Louisiana inputs to a national formula. Get the inputs right and the ratio takes care of itself.

The same arithmetic with a different set of local inputs runs on our Tennessee page, where a short-term rental permit rewrites the tax class. It runs again on the Texas version of the same worked example. Louisiana is different from both, because the state never changes your classification. It changes your exemption and your premium.

How is the ratio calculated on a Louisiana rental?

Divide the monthly rent by the full monthly housing cost. The housing cost is principal, interest, taxes, insurance and any association dues, which lenders shorten to PITIA. A result of 1.00 means the rent covers the cost exactly.

Above 1.00 the property carries itself with something left over. Below 1.00 it does not. Which loan structure goes into that denominator is itself a choice. For example, an interest-only structure thins the denominator in a way worth understanding before you compare programs.

A New Orleans double, worked from the City's own millage

That ratio clears a 1.00, 1.10 or 1.15 floor, but it falls just short of 1.20. Notice, though, that two of the three lines in the denominator are Louisiana lines. The tax line came from a parish millage workbook and a constitutional assessment rule.

The insurance line came from a coastal market. Move either one and the ratio moves with it, and the next two sections show exactly how far.

What happens to the homestead exemption when a house becomes a rental?

It disappears, and the seller's tax bill will not warn you. Article VII, Section 20 of the Louisiana Constitution exempts a bona fide homestead from state, parish and special ad valorem taxes. The home must be owned and occupied by the owner.

The exemption reaches 7,500 dollars of assessed valuation. At the 10 percent assessment ratio in Section 18, that is the first 75,000 dollars of market value. An investor who will never live in the property cannot claim it.

Here is the part most guides miss. Louisiana does not move a rental into a higher assessment class the way some states do. Section 18 sets land at 10 percent and improvements for residential purposes at 10 percent, and a rented house is still a residential improvement.

So the assessment ratio you inherit is the seller's ratio. What you do not inherit is the seller's exemption. In short, Louisiana un-exempts your rental rather than reclassifying it.

The same house, the same rent, two tax bills

Hold everything else constant and change only who lives there. The City's millage workbook flags three police and fire millages, totalling 11.51 mills, that are levied without applying the homestead exemption. Every other millage in the 131.99 total honors it. The table isolates the exemption, so the rent and the loan stay exactly where they were in the worked example above.

The gap is 903.60 dollars a year, or 75.30 dollars a month on the escrow line. In ratio terms it is the difference between 1.24 and 1.20. That is not a large step on its own.

It is, however, a step that a buyer working from the seller's bill takes in the wrong direction. And it stacks on top of whatever the insurance line does next.

First, some owners hold a special assessment level. That is a freeze Louisiana gives certain homestead owners, such as people 65 or older. Under Article VII, Section 18(G)(4)(a), the freeze ends when the property is sold. Then the property shall be immediately revalued at fair market value.

Second, when a reappraisal raises a homestead's assessed value by more than 50 percent, the extra tax is phased in over four years. Under Section 18(F)(2)(b), that phase-in ends at a transfer, and tax runs on the full assessed value from then on. Ask the assessor about both before you trust the seller's bill.

Why is insurance the line that decides a Louisiana file?

Because it is the one input that can swing by thousands of dollars on the same house. And a DSCR file has nowhere to hide it. On a primary residence, a high premium is a household budget problem.

On a DSCR file it is a qualification problem, since the premium sits inside the housing cost the rent has to cover. Louisiana's coastal parishes carry wind exposure, and landlord policies on rentals there routinely price with a separate wind or hurricane deductible. So the quote has to come before the offer, not after.

The same double, five insurance quotes

Hold the rent, the loan and the tax line from the worked example. Change only the annual premium. The point of the table is to show how much of the outcome the insurance line controls. It also shows how quickly a coastal quote can take a file from comfortable to marginal.

Every 1,200 dollars of annual premium costs the file about five hundredths of coverage. That is larger than the entire homestead effect in the previous section. It is the reason experienced Louisiana investors bind a quote before they negotiate price.

For a rental, the policy is a landlord policy rather than a homeowner policy, and it is a separate purchase from the loan.

The discount the state makes insurers give

Louisiana law gives you one lever on that line. R.S. 22:1483 covers any insurer that files rates with the Commissioner of Insurance. It must provide an actuarially justified discount, credit, rate differential, adjustment in deductible, or any other adjustment.

It goes to insureds who build or retrofit a structure to the State Uniform Construction Code. It also goes to those who build to the FORTIFIED home standards of the Insurance Institute for Business and Home Safety.

The Department of Insurance publishes an annual report under Act 533 of 2024 listing each insurer's filed discount. The 2026 report notes the listed discounts apply only to structures holding a FORTIFIED Roof designation. It adds that how each insurer applies them varies with its own underwriting rules.

For a DSCR buyer that is a due-diligence question with a dollar value. Ask whether the roof carries a FORTIFIED designation. If it does not, ask what a compliant roof would cost against the premium reduction on the quote. A lower premium raises the ratio directly. Nothing else on the file does that as cheaply.

Can you underwrite a New Orleans short-term rental?

Only when the city says the property may be one, and the city says so through a license, not a listing. New Orleans rewrote its short-term rental ordinances in 2023, and the current rules took effect on July 1, 2023 under Ordinances 029381 and 029382 MCS. The Short Term Rental Administration splits licenses into non-commercial, which it calls NSTR, and commercial, which it calls CSTR.

The non-commercial license runs on a lottery

The city's own announcement states the limit plainly. A maximum of one NSTR or bed and breakfast may be permitted per square. Where more than one person applies on the same square, the city allocates the license by lottery. The lotteries now run quarterly.

The city posts each quarter's application window and lottery date on its short-term rental home page, which was last updated September 14, 2026. Check that calendar, and confirm the window with the STR Administration before applying.

An operator's license is required alongside the owner's license, and the operator must hold a local picture ID that lists the property address.

Then comes the line that decides most investor files. The city's lottery guidance states that a property is not eligible for an NSTR license if it is held in an LLC.

It tells owners to move the property into their personal name with the Orleans Parish Assessor before applying. DSCR borrowers routinely vest in an entity, and the section below on LLCs explains why. In New Orleans, that vesting choice and a non-commercial short-term rental license cannot coexist.

Why the commercial license is a status to confirm, not a plan

Commercial short-term rentals belong to commercial and mixed-use zoning under the Comprehensive Zoning Ordinance. On May 7, 2026, the City Council adopted a new interim zoning district, Section 19.4.A.23, under Ordinance 30625 MCS. It covers transient lodging uses, and commercial short-term rentals are one of them.

Under that district, a new commercial short-term rental needs conditional use approval, even where the base zoning would otherwise permit it. The city's short-term rental home page, last updated September 14, 2026, tells commercial applicants to file a Non-Structural Renovation permit first. Zoning then reviews the request and refers it to the City Planning Commission.

So a commercial license is an approval process with no guaranteed outcome. Confirm where a property stands with the Short Term Rental Administration on the day you write your offer. It is not income you can underwrite from a listing.

For a DSCR file the consequence is concrete. In residential zoning, underwrite the long-term lease rent, because that is the income the property will lawfully produce for an entity owner.

Underwriting the seller's nightly revenue in those districts means underwriting income that ends at closing. Our guide to documenting nightly income where a city permits it walks through what lenders accept when a license does transfer.

How much loan will the rent actually support?

Run the arithmetic backwards instead of forwards. Start from the rent, pick the coverage ratio you need to hit, and the maximum housing cost falls out of the division. Subtract the taxes and insurance and what remains is the principal and interest the property can carry.

The one-line shortcut

Divide the rent by your target ratio. That is the largest monthly housing cost the property supports. Then subtract every non-loan piece of that cost. In the New Orleans example the taxes and insurance together are 701.97 dollars a month, so that figure comes off every row.

Read that as a price list for certainty. Each five hundredths of coverage costs the property between roughly 92 and 131 dollars a month of borrowing power. The steps get cheaper as the ratio climbs. Moving from 1.00 to 1.25 costs 550 dollars a month of principal and interest, which is a materially smaller loan on the same double.

Notice too that the 701.97 dollar deduction is where Louisiana lives in this table. Cut the premium and every row gains borrowing power at once. Our step-by-step pass through the calculator takes the same arithmetic apart one line at a time.

What does a conventional investment loan require that this does not?

Your personal income. A conventional investment loan qualifies you on your tax returns and debt-to-income ratio under Fannie Mae's published rules. A DSCR loan qualifies the property on its rent. That is worth knowing, because conventional financing is often the better answer and nobody should sell against it.

Fannie Mae publishes its rules, which is exactly why one column of the table below carries numbers and the other says program specific. DSCR programs are not agency programs, so there is no published national rulebook to quote. Our page on the questions that separate one DSCR program from another is the place to start when two offers look alike.

The published ceilings, side by side

The honest summary is that conventional financing asks more about you and DSCR asks more about the property. If your tax returns support the debt and you are inside the agency ceilings, conventional is usually the cheaper road.

The New Orleans double above is a two-unit purchase, so the agency ceiling that applies to it is 75 percent. That happens to be the same leverage the worked example used.

Should you hold a Louisiana rental in an LLC?

Often, but not for a New Orleans short-term rental. Holding the rental in a limited liability company (an LLC) is common on business-purpose loans. It costs 30 dollars a year to keep (35 dollars from October 1, 2026). Yet the city will not issue a non-commercial short-term rental license to an LLC-held property.

The Secretary of State's current fee schedule lists the annual report for a Louisiana limited liability company at 30 dollars. That rises to 35 dollars on October 1, 2026 under Act 921 of the 2026 Regular Session. The Secretary of State has already published the fee schedule for that date.

What the entity does not change

Taxes on the rent. Louisiana moved to a flat 3 percent individual income tax for taxable periods beginning on or after January 1, 2025. The change came under Act 11 of the 2024 Third Extraordinary Session. The Department of Revenue states that the graduated brackets have been repealed.

A single-member LLC or a partnership passes its rental income through to its members. So that 3 percent is the state rate the rent ultimately meets. It is a modest number, and it is one more reason Louisiana rentals are attractive to hold. It has no bearing on the approval, because a DSCR loan never looked at your return.

What the entity does change in New Orleans

Two things, both already on this page. First, a property held in an LLC is not eligible for a non-commercial short-term rental license. That closes the nightly-rent door in residential zoning. Second, Orleans Parish levies its documentary transaction tax on transfers and donations as well as sales.

So moving a property you already own into an entity is itself a taxable recording there. Elsewhere in the state that transfer costs the recording fee plus the parish clerk's own per-document fees, and no transfer tax.

What do Louisiana's landlord rules change?

They shape your vacancy assumption, which is the input most investors never revisit. Article 4701 of the Code of Civil Procedure requires a written notice to vacate once a lessee's right of occupancy has ended.

That covers expiration of the term, nonpayment of rent or any other reason. The notice must allow not less than five days. The same article lets a lessee waive that notice by a written waiver in the lease. In that case the landlord may proceed without it. A summary rule for possession follows in the same code.

The deposit rule, and its penalty

Security deposits are governed by R.S. 9:3251. The statute sets no ceiling on the deposit itself. It does require the landlord to return the deposit within one month after the lease terminates. The landlord may keep only what is reasonably necessary to remedy a default or unreasonable wear. The landlord must also send an itemized statement for anything retained.

If the lessor's interest is sold during the lease, the deposit transfers to the buyer with the obligation to return it. R.S. 9:3252 gives the tenant a remedy for willful noncompliance: the portion wrongfully retained plus 300 dollars or twice the amount wrongfully retained, whichever is greater.

For a DSCR file none of that changes the ratio directly. It changes how long a non-paying unit stays non-paying, and therefore how many months of reserves a prudent investor holds behind the loan. A five-day notice is not a five-day eviction, because the court process for possession still follows it.

What does Louisiana add to your closing costs?

Less than most states, with one parish exception worth planning for. Louisiana has no state real estate transfer tax. Article VII, Section 2.3 of the constitution bars any new tax or fee on the sale or transfer of immovable property.

Voters approved that amendment on November 19, 2011, and it took effect on November 30, 2011. That bar reaches the state and every political subdivision. Recording fees, impact fees, parcel fees and ad valorem taxes are expressly not treated as such a tax.

Recording, statewide

R.S. 13:844 sets the parish clerk's fee for filing and recording a document by page count. One to five pages is 100 dollars, six to twenty-five pages is 200 dollars, twenty-six to fifty pages is 300 dollars. Longer documents pay 300 dollars plus 5 dollars for each page over fifty.

The fee covers indexing of up to ten names and one certified copy. A financed purchase records at least two documents, the act of sale and the mortgage, and each is charged on its own page count.

Read the statute as the floor, not the price. Parishes add their own per-document fund fees on top of it. The East Baton Rouge Parish Clerk adds a 30 dollar Judicial Building Fund fee under R.S. 13:992.1 and a 5 dollar Louisiana Clerks' Remote Access Authority fee under R.S. 13:754. So its published tiers read 135, 235 and 335 dollars.

The Lafayette Parish Clerk lists 105 dollars for one to five pages and 205 dollars for six to twenty-five pages. Both include the 5 dollar remote access fee. The parish clerk's own fee schedule is the number to budget.

Recording, in Orleans Parish

The Clerk of Civil District Court applies the same page-count schedule. It adds a uniform 30 dollar building fund fee, its own version of the per-document add-on other parishes charge. It also charges separately when a document is recorded in both the mortgage and conveyance records.

Then comes the parish's own line. Orleans Parish assesses a documentary transaction tax of 325 dollars on each recorded sale, donation, transfer, mortgage and commercial lease. A reduced scale applies to mortgages under 9,000 dollars.

The 325 dollars is not always flat. The Clerk counts the front and back of every page. When a taxable document runs past 25 pages, it adds 100 dollars per page, up to a maximum of 2,525 dollars.

On a longer document, only one thing keeps the 325 dollar rate. That is a notarized statement that the property is an owner-occupied single-family home or double. A DSCR rental cannot give that statement.

The Clerk names who pays: the seller on the sale, the donor on a donation, and the mortgagor on the mortgage. The tax is due at recording, and an unpaid balance after thirty days draws interest and a 500 dollar penalty.

The worked example, recorded in Orleans Parish

Two things follow. First, the parish you record in is a real line item in Louisiana in a way the state is not. Second, none of these are lender charges, so no amount of shopping removes them. Compare that to the Alabama version of the same file, where the state itself takes a cut at recording.

What rents do Louisiana's metros support?

A lender uses appraised market rent, normally from a Form 1007 rent schedule, not a public benchmark. Still, a public benchmark is useful when you are screening deals from a distance.

It tells you roughly where a submarket sits before you pay for anything. The table uses HUD's Fair Market Rents for the current fiscal year and for the year that begins October 1, 2026. HUD has already published both.

Use those figures for screening only. A voucher payment standard and an appraiser's opinion of market rent are different quantities measured for different reasons. A DSCR file runs on the second one. Two things in the table are still worth noticing.

New Orleans steps up sharply for FY 2027, while Baton Rouge and Shreveport step down. Where a benchmark moves that much in one year, an appraiser's rent schedule and a lender's review of it will both take more care.

Putting the Louisiana inputs together

A clean Louisiana DSCR file therefore answers four local questions before it answers any national one. What is the parish millage, and what does the tax bill become once the homestead exemption is gone? What does a landlord policy with a wind deductible actually cost on this roof, and does a FORTIFIED discount apply?

If it is in New Orleans, does the zoning and the license lottery support the income you are underwriting? And which parish records the sale? Orleans adds its documentary transaction tax to the sale and the mortgage, 325 dollars each on documents of 25 pages or fewer. The other parishes charge no such tax.

Answer those four and the ratio is arithmetic. Skip them and the ratio is a guess wearing four decimal places. The full product overview lives on our DSCR product explained from application to closing. It is the right next page if this one is your first.

DSCR loan in Louisiana: FAQ

Working the ratio and the loan type

Property tax and the homestead exemption

Short-term rentals in New Orleans

Entities and Louisiana taxes

Closing costs and landlord rules

About the reviewer

Across Valley West: Test a Louisiana address before you send it in. Use a coverage ratio calculator that accepts your own figures on our conventional site. The same site explains ground-up construction financed on projected rent. A landlord policy is a different product from a homeowner's policy, and that conversation belongs with Valley West Insurance, our insurance agency.

Keep reading

• DSCR loans: the full product overview
• The same ratio worked on a Nashville rental
• How the numbers land in Texas
• Alabama, the Gulf Coast neighbor with a recording tax
• Vesting a rental in an LLC
• The calculator, one line at a time
• How to compare DSCR programs

Sources: New Orleans short-term rental rules

• City of New Orleans Short Term Rental Administration, overview of short-term rentals. The March 23, 2023 ordinances, 029381 and 029382 MCS, effective July 1, 2023. Page last updated March 27, 2026.
• City of New Orleans, changes to short-term rental laws enacted March 23, 2023. The one-per-square limit on non-commercial licenses and the lottery rule quoted above.
• City of New Orleans, important information regarding the upcoming NSTR lottery. The statement that a property held in an LLC is not eligible for an NSTR license, and the operator identification requirement.
• City of New Orleans Short Term Rental Administration home page. The quarterly NSTR lottery calendar. Also the instruction that commercial applicants file a Non-Structural Renovation permit so zoning can refer the request to the City Planning Commission. Page last updated September 14, 2026.
• New Orleans Comprehensive Zoning Ordinance, Section 19.4.A.23, Transient Lodging Interim Zoning District. Adopted by Ordinance 30625 MCS on May 7, 2026. Commercial short-term rentals and other transient lodging uses need conditional use approval under Section 4.3.

Sources: Orleans Parish tax and recording

• City of New Orleans Bureau of Treasury, 2025 millage rates workbook. The 121.20 mill citywide total, the 10.79 mill Orleans Levee District millage, and the three police and fire millages levied without the homestead exemption, 4.67, 4.62 and 2.22 mills.
• City of New Orleans Bureau of Treasury, how taxes are calculated. Taxable assessment less exemptions multiplied by the millage rate.
• Orleans Parish Clerk of Civil District Court, documentary transaction tax. The 325 dollar tax, the documents it reaches, the parties who pay it and the 500 dollar late penalty. Also the extra 100 dollars per page on a document over 25 pages, up to 2,525 dollars, and the notarized owner-occupied statement that avoids it.
• Orleans Parish Clerk of Civil District Court, Land Records Division fee schedule. The R.S. 13:844 page tiers as applied in Orleans, the 30 dollar uniform building fund fee and the separate charge for dual recording.

Sources: parish clerks of court outside Orleans

• East Baton Rouge Parish Clerk of Court, filing, recording and indexing fee schedule. The 30 dollar Judicial Building Fund fee under R.S. 13:992.1 and the 5 dollar Louisiana Clerks' Remote Access Authority fee under R.S. 13:754 added to every recorded document, and the resulting 135, 235 and 335 dollar tiers.
• Lafayette Parish Clerk of Court, fee schedule. The 105 dollar and 205 dollar conveyance and mortgage recording tiers, with the 5 dollar remote access fee included.

Sources: Louisiana Constitution and codes

• Louisiana Constitution, Article VII, Section 18, ad valorem taxes. Land and residential improvements at 10 percent, other property at 15 percent, and reappraisal at least every four years. Paragraph (G)(4)(a) requires revaluation when frozen property is sold, and (F)(2)(b) ends a phase-in at transfer.
• Louisiana Constitution, Article VII, Section 20, homestead exemption. The 7,500 dollar assessed valuation exemption for a bona fide homestead owned and occupied by its owner.
• Louisiana Constitution, Article VII, Section 2.3, limitation on taxes upon the sale or transfer of immovable property. The prohibition on new taxes or fees upon the sale or transfer of immovable property after November 30, 2011. Added by Act 425 of the 2011 Regular Session, approved by voters on November 19, 2011 and effective November 30, 2011. Recordation fees, impact fees, parcel fees and ad valorem taxes are carved out.
• House Bill 135 of the 2011 Regular Session, enrolled, proposing Article VII, Section 2.3. The joint resolution that submitted the amendment at the November 19, 2011 statewide election and set November 30, 2011 as the date it took effect.
• Louisiana Code of Civil Procedure, Article 4701, termination of lease and notice to vacate. The five-day minimum notice and the written waiver.
• Louisiana R.S. 9:3251, lessee's deposit to secure lease. Return within one month, the itemized statement, and transfer of the deposit on sale of the leased premises.
• Louisiana R.S. 9:3252, damages for willful failure to comply. The 300 dollar or double-retention remedy.
• Louisiana R.S. 13:844, clerks of court fees for filing and recording documents. The 100, 200 and 300 dollar page tiers, as amended by Acts 2017, No. 173.
• Louisiana R.S. 22:1483, premium discounts for construction to building-code and FORTIFIED standards. The actuarially justified discount insurers must provide.

Sources: Louisiana state agencies

• Louisiana Department of Insurance, Act 533 FORTIFIED discount report to the Legislature, 2026. The insurer-by-insurer list of filed FORTIFIED Roof discounts and the note that application varies by insurer.
• Louisiana Department of Revenue, individual income tax rates and brackets after reform. The flat 3 percent rate for taxable periods beginning on or after January 1, 2025.
• Louisiana Secretary of State, forms and fee schedule. The 30 dollar LLC annual report in effect at publication.
• Louisiana Secretary of State, fee schedule effective October 1, 2026. The 35 dollar annual report under Act 921 of the 2026 Regular Session.

Sources: HUD rent data and agency ceilings

• U.S. Department of Housing and Urban Development, Fair Market Rents. The FY 2026 and FY 2027 metropolitan schedules used in the rent table, with FY 2027 effective October 1, 2026.
• Fannie Mae Eligibility Matrix, dated August 5, 2026. Investment property loan-to-value ceilings for purchase and cash-out transactions.
• Fannie Mae Selling Guide B3-4.1-01, minimum reserve requirements, dated August 7, 2024. Six months of reserves on an investment property and the 2, 4 and 6 percent reserve bands for other financed properties. The September 2, 2026 date shown on that page belongs to the downloadable Selling Guide PDF edition, not to this section.

Sources: federal regulation

• Electronic Code of Federal Regulations, 12 CFR 1026.3, exempt transactions. The business-purpose exemption that keeps a non-owner-occupied rental loan outside the consumer mortgage rules.
• Electronic Code of Federal Regulations, Supplement I to Part 1026, Official Interpretations, comment 3(a)-4. Credit on rental property that is not owner-occupied is deemed business-purpose. An owner who expects to occupy it for more than 14 days in the coming year falls outside the rule.

This article is for general information and is not legal, tax or investment advice. Valley West Mortgage is an independent mortgage lender, NMLS #65506, licensed in Louisiana. Equal Housing Opportunity. Valley West Mortgage is not affiliated with, or acting on behalf of or at the direction of, HUD, the FHA, the VA or any other government agency. DSCR loans are business-purpose loans secured by non-owner-occupied investment property. Nothing on this page is an offer of credit, a rate quote, a preapproval or a commitment to lend, and program terms vary by lender and by property.