How It Works
DSCR stands for Debt Service Coverage Ratio. A DSCR loan qualifies based on the rental income the property generates compared to its monthly mortgage payment, not the borrower's personal income or employment. The DSCR is calculated by dividing the property's gross monthly rent by the total monthly mortgage payment including principal, interest, taxes, insurance, and HOA. A DSCR of 1.00 means the property exactly covers its housing payment; a DSCR of 1.25 means the rent is 25% higher than the payment.
Most DSCR lenders require a minimum ratio of 1.00 to 1.25, though some programs go down to 0.75 for strong borrowers willing to accept higher pricing. Because qualifying is based on the property itself, DSCR loans are ideal for full-time real estate investors, LLC-titled holdings, BRRRR strategies, and short-term rental operators. There's no DTI calculation, no employment verification, and no tax returns required.
DSCR loans typically allow you to close in an LLC, finance up to 10+ properties, and use estimated rent (market rent surveys or short-term rental projections) for properties not yet leased. Expect down payments of 20–25%, interest rates 1%–2% above primary-residence pricing, and loan amounts up to several million per property. It's the workhorse loan product for serious residential real estate investors.
Who Is This For?
- Full-time real estate investors building rental portfolios
- Buyers wanting to close in an LLC for asset protection
- Short-term rental operators (Airbnb, VRBO) qualifying on projected income
- BRRRR investors refinancing after value-add renovations
- Investors who own more than 10 financed properties (Fannie/Freddie limit)