DSCR Loans

Qualify Based on Rental Income, Not Personal Income

Debt Service Coverage Ratio (DSCR) loans are ideal for real estate investors who want to qualify for a mortgage using property cash flow instead of personal income or tax returns. These loans are perfect for landlords building a rental portfolio, short-term rental owners, and investors seeking faster, more flexible approvals.

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What is a DSCR Loan?

A DSCR loan is a type of investment property mortgage that evaluates a property’s ability to generate enough income to cover its own debt. Instead of reviewing the borrower’s personal income or employment history, lenders look at the property’s rental income and compare it to the monthly mortgage payment (including principal, interest, taxes, insurance, and HOA fees, if applicable). This ratio—known as the Debt Service Coverage Ratio—helps determine eligibility. A DSCR of 1.0 or higher typically indicates the property can cover its expenses. This makes DSCR loans a powerful option for self-employed investors, high-net-worth individuals, and anyone who relies on rental income rather than W-2 employment.

Key Features of DSCR Loans

Qualification based on rental income, not personal income
No tax returns or W-2s required in most cases
Designed specifically for investment properties
Works for short-term and long-term rental strategies
Available for single-family, multi-family, and mixed-use properties
Typically requires a larger down payment than conventional loans
Can be used for purchase or refinance transactions
Faster approval process than traditional investor loans
DSCR ratios generally range from 0.75 to 1.25+ depending on the lender
Often available to U.S. and foreign national investors

Types of DSCR Loan Programs

Single-Family Rental DSCR Loans – For 1–4 unit residential rental properties
Multi-Family DSCR Loans –For 5+ unit residential investment properties
Short-Term Rental (Airbnb/VRBO) DSCR Loans – Based on projected or market rental income
Cash-Out Refinance DSCR Loans –Allows investors to access built-up equity
Portfolio DSCR Loans – Designed for investors with multiple properties

Frequently Asked Questions – DSCR Loans

1. What is a DSCR loan?

A DSCR (Debt Service Coverage Ratio) loan is a mortgage designed for real estate investors. Instead of using personal income to qualify, lenders look at the property’s ability to generate rental income compared to its debt obligations.

2. How is DSCR calculated?

DSCR = Net Operating Income (NOI) ÷ Total Debt Service. For example, if a property earns $5,000 monthly and the mortgage payment is $4,000, the DSCR is 1.25 (which is considered strong).

3. What DSCR ratio do lenders require?

Most lenders require a DSCR of 1.0 or higher, meaning the property generates enough income to cover its mortgage. Some programs allow ratios slightly below 1.0 with higher down payments.

4. Who is a good candidate for a DSCR loan?

Real estate investors who prefer not to provide personal income documentation or who own multiple properties often use DSCR loans.

5. What are the down payment requirements?

Typically, 20–25% down is required, though some lenders may allow lower amounts for strong DSCR ratios.

6. What credit score do I need?

Most DSCR programs require a minimum credit score of 620–680. Higher scores can help secure better rates.

7. Are DSCR loans considered non-QM loans?

Yes. DSCR loans fall under the non-qualified mortgage category because they don’t rely on traditional income verification.

8. Can DSCR loans be used for short-term rentals (Airbnb)?

Yes. Many lenders allow DSCR loans for short-term rental properties, provided income can be documented through rental history or market projections.

9. What documents are required?

Common documentation includes:

Lease agreements or rental income statements
Property appraisal
Credit report
Bank statements for reserves

10. What are the pros and cons of DSCR loans?

Pros: No personal income verification, ideal for investors, flexible qualification
Cons: Higher interest rates than conventional loans, larger down payments, non-QM guidelines