Complete 2026 guide to DSCR loans in Pennsylvania — Act 6 PPP ban on 1-2 unit loans, Philadelphia/Pittsburgh markets, judicial foreclosure, and pre-approval.
Pennsylvania DSCR facts on this page
These figures are the published profile on this page. They are not a mortgage rate.
- Effective property tax: 1.56%
- State income tax: yes
- Foreclosure: judicial
- Eviction timeline: 45-90 days
- Statewide rent control: no
- Prepayment penalty: barred on 1-2 unit loans at or below the Act 6 base figure ($329,411 in 2026)
The table on DSCR rates is the national DSCR index, not a Pennsylvania quote. Published program fields, not a ranking, are on best DSCR lenders.
Pennsylvania is a “special-tier” DSCR state because 41 P.S. Section 405 bars prepayment penalties on residential mortgages, which Act 6 defines as loans at or below the annually adjusted base figure ($329,411 in 2026) on property with two or fewer residential units. The definition has no occupancy test, so it reaches investor loans too. Single-family and duplex DSCR loans under the base figure close without a PPP; 3-4 unit loans and loans above it fall outside the rule. Beyond this specific rule, PA offers strong Philadelphia and Pittsburgh markets with genuinely attractive cash-flow math in specific neighborhoods.
This guide walks through DSCR lending in Pennsylvania: the Act 6 PPP rule, the two major metros, and the specific operational considerations that matter.
Why Investors Choose Pennsylvania
Pennsylvania’s population is essentially flat at 13 million, but the two major metros have very different investor theses.
Philadelphia has the largest 2-4 unit small-multifamily stock in the US after New York. Classic brick rowhouses, twin homes, and small multifamily built 1890-1940 dominate many neighborhoods. Fishtown, Kensington, Point Breeze, Fairmount, East Passyunk, South Philadelphia, West Philadelphia, and Mt. Airy each have distinct DSCR investment profiles. Philadelphia has been the subject of significant out-of-state DSCR investor activity since 2017, particularly in neighborhoods undergoing gentrification.
Pittsburgh has a very different market. Carnegie Mellon, University of Pittsburgh, UPMC healthcare system (one of the largest non-profit health systems in the US), a growing tech corridor (Google, Duolingo, Uber ATG legacy), and a diversified employer base have made Pittsburgh surprisingly stable post-steel-era. Cost basis is low; cap rates are high.
Secondary markets: Allentown-Bethlehem-Easton (Lehigh Valley) has a logistics and manufacturing base. Harrisburg is the state capital. Lancaster has tourism + manufacturing. Erie on Lake Erie has a healthcare and education economy.
DSCR Loan Rules in Pennsylvania — The Act 6 PPP Rule
41 P.S. Section 405 (Pennsylvania’s “Act 6”) says residential mortgage obligations may be prepaid without any penalty. Section 101 defines a residential mortgage as a loan of the “base figure” or less secured by Pennsylvania property with two or fewer residential units, condo units included. The PA Department of Banking and Securities adjusts the base figure each year: $329,411 for 2026, up from $319,777 in 2025. The definition has no occupancy test, and Act 6’s business-loan exclusion applies to its interest-rate caps, not to Section 405, so the rule can reach investor DSCR loans.
Practical effect:
- Pennsylvania bars prepayment penalties on 1-2 unit loans at or below an annually adjusted base figure, so those DSCR loans are structured without prepayment penalties
- 3-4 unit loans and loans above the base figure are outside Section 405 and can carry the usual PPP options
- With no PPP there is no exit cost when you sell or refinance; ask each lender how its no-PPP rate compares with its PPP pricing
- Loans to corporations may be treated differently
This is a technical area — confirm the PPP terms with a lender experienced in PA DSCR structure.
Beyond the Act 6 PPP rule, standard DSCR terms apply: min DSCR 0.75-1.25, max LTV 75%-80% on purchase, 70%-75% on cash-out refi, min FICO 660-680, 6 months reserves.
Taxes & Carrying Costs
Pennsylvania’s effective property tax rate of 1.56% is among the top 10. Rates vary significantly by county and school district. Philadelphia city runs roughly 1.4% total. Philly suburbs (Montgomery, Bucks, Delaware, Chester counties) often run 1.8-2.2%. Pittsburgh (Allegheny County) runs 1.8-2.2%. School district millage is often the largest component.
State income tax: flat 3.07% — one of the lowest flat-rate states. Out-of-state investors file PA non-resident returns.
Philadelphia and Pittsburgh city taxes: Philadelphia Net Profits Tax (3.75% resident / 3.44% non-resident) applies to Philadelphia-source business income. Pittsburgh has a local earned income tax (LST 1% + 1% school). Rental income reported through LLCs may or may not be subject depending on structure — work with a PA CPA for proper classification.
PA LLCs: $125 formation, $70 annual decennial report (every 10 years, plus Docketing Statement at formation).
Insurance in PA is moderate — $1,000-$1,600 per $300K across most of the state. Older urban housing (Philadelphia, Pittsburgh) with knob-and-tube wiring or older plumbing can face carrier issues.
Foreclosure & Eviction Landscape
Pennsylvania is a judicial foreclosure state. Process: complaint filing, Act 91 notice, sheriff’s sale. Philadelphia County has a mandatory Conciliation Conference Program (mortgage foreclosure diversion) that extends timelines materially — typical Philadelphia foreclosure runs 14-24 months. Non-Philadelphia Pennsylvania runs 8-12 months.
Eviction runs 45-90 days. Non-payment requires a 10-day notice (or contractual notice if longer). Landlords file a Landlord-Tenant complaint in magisterial district court. Philadelphia also has the Philadelphia Eviction Diversion Program that adds time. Physical removal by sheriff’s constable follows judgment.
Landlord-Tenant Law
No statewide rent control. Philadelphia’s City Council has debated local rent stabilization several times without passage. Philadelphia’s 2019 Good Cause Eviction ordinance (Phila. Code § 9-804) remains in force in 2026 and restricts the grounds on which a landlord may refuse to renew a lease of less than 12 months — it is not rent control, but it constrains no-cause non-renewals during the initial year of tenancy. The PA Landlord Tenant Act governs statewide. Security deposits are capped at two months’ rent for the first year (reduced to one month thereafter). Landlords have 30 days to return with itemized deductions and interest (on deposits held 2+ years in financial institutions).
Philadelphia Rental License (L&I) is required for most rental property. Annual inspection fees apply. Lead-based-paint certification is required (Philadelphia has one of the most stringent lead-safe programs in the US). Budget $300-$900 per property for compliance.
Top Pennsylvania Markets
Philadelphia — The anchor DSCR market. Neighborhood selection is everything. DSCR properties in Fishtown, Kensington ($250K-$450K for a rowhouse; rents $1,500-$2,200); Point Breeze ($225K-$400K; rents $1,400-$2,000); South Philly ($275K-$500K; rents $1,600-$2,300); Mt. Airy, Germantown, West Philly at lower basis. 2-4 unit “triplexes” and “twins” trade at 6-9% cap rates in many neighborhoods. Cap rates are structurally higher than most coastal metros because basis is lower.
Pittsburgh (Allegheny County) — DSCR properties in Lawrenceville, Bloomfield, East Liberty, Brighton Heights, Highland Park, Squirrel Hill, Greenfield. Cost basis $175K-$350K for single-family; rents $1,300-$2,000. Cap rates 7-10%. Significant older-housing-stock considerations.
Allentown / Lehigh Valley — Logistics boom (Amazon, FedEx hubs), manufacturing. Lower basis than eastern PA suburbs. DSCR properties $200K-$325K with rents $1,500-$2,000.
Harrisburg, Lancaster, Erie — Secondary markets with specific local economies.
Special Considerations
The Act 6 PPP rule is the defining PA DSCR fact for 1-2 unit loans. Philadelphia L&I rental license and lead-safe certification are non-negotiable compliance costs. Philadelphia foreclosure timelines are among the longest in the country — this affects lender pricing. Neighborhood-level variance in Philadelphia is extreme; a 15-minute walk can change rent comps by 40%.
Entity Formation Notes
PA LLCs cost $125 formation and have a $70 decennial report (every 10 years). No annual report requirement. Standard structures apply. Many investors use a Wyoming or Delaware parent holding LLC owning PA operating LLC. See the entity structure guide.
Getting Started
Work with a DSCR lender experienced in PA — the PPP rule is often mishandled by lenders without PA volume. Use the DSCR calculator, check current rates, then get matched.
Related guides: New Jersey, Ohio, Maryland.