DSCR Loans
DSCR Loans for Real Estate Investors
Get rental properties or refinance without tax returns, W-2s and less income verification.
Investors can qualify through property cash flow, not personal income. DSCR loans (Debt Service Coverage Ratio) are more accommodating and often serve as a breath of fresh air for real estate investors who want to opt out of traditional mortgage guidelines.
What Is a DSCR Loan?
A DSCR loan (Debt Service Coverage Ratio Loan) is an example of a non-QM mortgage where the borrower qualifies using the rental income of the property instead of his personal income. This type of loan is designed for real estate investors wishing to diversify their portfolios without the need for conventional income documentation.
DSCR Formula: DSCR = Gross Rental Income / Monthly Mortgage Payment
Generally, a DSCR of 1.0 or greater demonstrates the property has sufficient income to service debts. Actual qualifying ratios may differ by lender.
Who Should Use a DSCR Loan?
DSCR loans are popular with:
- Investors in property
- Landlords with buy-and-hold strategies
- Self-employed individuals with low reportable income
- Corporations, LLCs, or business organizations acquiring investment real estate
A DSCR loan could work well for you if you want to buy a property generating rental income.
Key Benefits of DSCR Loans
- No income or employment verification needed
- No tax returns, W-2s, or pay slips necessary
- Loans can be given to individuals and LLCs
- Available to qualifying 1–4 unit residential investment properties
- Loan qualification is based on a property's income-generating capabilities
DSCR Loan Requirements
- Minimum DSCR ratio often set at or above 1.0
- Minimum required credit score differs by lender (often 620+)
- Usually, a 20%–25% down payment is required
- An appraisal may require a Form 1007 (rent schedule) for rental income analysis.
- Lease agreements or projections of market rent may need to be provided.
- Depending on the lender, cash reserves may be necessary.
All loans are subject to underwriting and eligibility approval.
FAQ
A DSCR loan allows investors to qualify for a mortgage using a property’s rental income instead of personal income.
Typically, a DSCR of 1.0 or higher is required. Some lenders may accept a lower ratio under specific conditions.
Policies vary. Some programs may consider short-term rental income with supporting documentation.
Yes, many DSCR lenders allow properties to be titled in an LLC or business entity.
Yes, you may need a current lease or market rent analysis from the appraisal to demonstrate expected income.
