DSCR Loans

    Debt Service Coverage Ratio loans for real estate investors

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    What is a DSCR Loan?

    A DSCR (Debt Service Coverage Ratio) loan is a type of investment property mortgage that qualifies borrowers based on the property's rental income rather than the borrower's personal income. This makes it an excellent option for real estate investors.

    The DSCR ratio is calculated by dividing the property's monthly rental income by its monthly debt obligations (mortgage, taxes, insurance, HOA). A DSCR of 1.0 or higher means the property generates enough income to cover its expenses.

    Key Benefits

    No personal income verification required
    No tax returns, W-2s, or pay stubs needed
    Perfect for self-employed and business owners
    Qualification based on property's income potential
    Can finance multiple investment properties
    Faster approval process than traditional loans
    Available for experienced and new investors
    No limit on number of properties owned

    Requirements

    DSCR Ratio:Typically 1.0 or higher (some lenders allow 0.75+)
    Credit Score:Typically 660+ minimum
    Down Payment:15% to 25%
    Property Type:Investment properties only (1-4 units)
    Cash Reserves:6-12 months typically required

    Who Should Consider This?

    • • Real estate investors
    • • Self-employed individuals
    • • Business owners with complex tax returns
    • • Those building a rental property portfolio
    • • High net worth individuals
    • • Borrowers who don't want to provide income docs
    • • Investors purchasing cash-flowing properties

    Important to Know

    How DSCR is Calculated: DSCR = Monthly Rental Income ÷ Monthly Debt Obligations (PITIA). For example, if a property generates $2,000/month in rent and has $1,500/month in expenses, the DSCR is 1.33.

    Interest Rates: DSCR loans typically have slightly higher interest rates than traditional mortgages due to their flexible qualification requirements.

    Long-Term vs. Short-Term Rentals: DSCR loans work for both traditional long-term rentals and short-term vacation rentals (Airbnb, VRBO), though requirements may vary.