Investor financing · DSCR loans
DSCR loans: qualify on the property's rent, not your income.
A debt service coverage ratio (DSCR) loan is an investment property mortgage underwritten on the rental income the property produces. Your personal tax returns, W-2s and debt-to-income ratio typically aren't used to qualify.
- Available nationwide, in all 50 states (business-purpose investor loan)
- No tax returns, W-2s or pay stubs, typically
- Close in an LLC or other entity (varies by lender)
- No conventional cap on financed properties with many lenders
- Purchase, rate-and-term refinance or cash-out
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How the program works
What is a DSCR loan?
How DSCR is measured
Lenders compare the property's monthly rent to its full monthly payment: principal, interest, taxes, insurance and HOA dues. Rent ÷ payment = DSCR. A 1.0 ratio means rent covers the payment.
Where the rent figure comes from
Usually an existing lease or the appraiser's market rent schedule. Some lenders accept short-term rental income history.
What it's for
Non-owner-occupied investment properties only: single-family rentals, 2–4 units, condos and, with some lenders, short-term rentals.
Side by side
DSCR loan vs. conventional financing
How the two typically compare. Guidelines vary by lender and program.
| Feature | Conventional loan | DSCR loan |
|---|---|---|
| Income documentation | Tax returns, W-2s, pay stubs; rental income often reduced by vacancy factors | Property's rent (lease or appraiser's rent schedule); personal income typically not documented |
| Debt-to-income (DTI) | Calculated, with maximum DTI limits | Typically not calculated; the property's DSCR is used instead |
| Vesting | Individual names only | LLC or other entity typically allowed (varies by lender) |
| Number of financed properties | Agency guidelines cap financed properties (generally 10) | Many lenders have no fixed cap; portfolio exposure limits vary |
| Employment history | Typically 2 years of documented employment | Typically not required |
| Occupancy | Primary, second home or investment | Investment property only |
| Pricing & down payment | Generally lower pricing; investment property minimums apply | Typically priced higher; down payment often larger, varies by DSCR and credit |
Advantages
Where a DSCR loan can beat conventional
No personal income docs
Write-offs, depreciation and irregular income typically don't hurt you, because the property qualifies itself.
DTI typically isn't a factor
Existing mortgages and debts don't stack up against a DTI limit the way they can with conventional loans.
LLC / entity vesting
Many DSCR programs let you close in an LLC, which conventional loans generally don't allow.
Scale past conventional caps
Many lenders don't apply the conventional financed-property limit, so you can keep growing a portfolio.
Faster, lighter file
Fewer income documents can mean a simpler underwriting process.
Short-term rentals
Some lenders accept documented short-term rental income (varies by lender).
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Borrower profiles
Who uses a DSCR loan
The growing portfolio investor
Owns several rentals and has hit, or is approaching, the conventional financed-property limit.
The self-employed investor
Tax returns show low net income after write-offs, but the target property cash-flows.
The LLC buyer
Wants to hold rentals in an entity for organization or liability reasons.
The 1031 exchange buyer
Exchanging into a replacement property on a tight timeline with minimal income paperwork.
The short-term rental buyer
Buying a vacation rental where a lender accepts short-term rental income.
The cash-out investor
Pulling equity from an existing rental to fund the next purchase.
Process
From scenario to closing
Check your scenario
Share the property, expected rent and down payment. No tax returns needed to start.
Estimate the ratio
We estimate the DSCR and compare programs across 500+ lenders.
Apply & appraise
Apply online; the appraisal typically includes a market rent schedule.
Close
Close in your name or an eligible entity.
Typical guidelines
What lenders generally look for
General ranges for illustration only. Guidelines, pricing and availability vary by lender and program and change over time.
| DSCR target | Often around 1.0 or higher; some programs consider ratios below 1.0 |
|---|---|
| Down payment | Commonly in the 20%–25% range for purchases; may be higher for lower ratios or credit scores |
| Credit score | Many programs start in the mid-600s |
| Reserves | Several months of payments in reserves is typical |
| Property types | 1–4 unit residential, condos and some short-term rentals; 5+ units are typically commercial |
| Occupancy | Investment property only |
Not a commitment to lend. All financing is subject to borrower and property eligibility, lender approval, program availability and applicable licensing.
FAQ
DSCR loan FAQs
What is a DSCR loan?
A debt service coverage ratio (DSCR) loan is a Non-QM investment property mortgage that qualifies you based on the property's rental income relative to its monthly payment, rather than your personal income.
How is DSCR calculated?
Lenders generally divide the property's monthly rent (from a lease or appraiser's rent schedule) by the monthly principal, interest, taxes, insurance and HOA dues. Exact methods vary by lender and program.
How is a DSCR loan different from a conventional investment loan?
Conventional loans typically require tax returns, a DTI calculation and individual vesting, and cap financed properties. DSCR loans typically qualify on rent, skip the DTI calculation, often allow LLC vesting and may not cap financed properties. They are typically priced higher.
Can I use a DSCR loan for my primary home?
No. DSCR loans are for investment properties. Self-employed buyers purchasing a home to live in may want to look at a bank statement loan.
Can I close in an LLC?
Many DSCR programs allow vesting in an LLC or other entity. Requirements vary by lender and program.
What if the rent doesn't fully cover the payment?
Some programs consider ratios below 1.0, usually with a larger down payment or stronger credit. Availability varies by lender.
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