DSCR Loans

A DSCR (Debt Service Coverage Ratio) loan is a mortgage for real estate investors that qualifies based on a property's rental income rather than the borrower's personal income. No tax returns, W-2s or employment verification are required. It is a non-QM product, which many banks do not offer, but that we can place across California, Oregon, Washington, Arizona and Hawaii.

How a DSCR loan works

DSCR compares a property's rental income to its total monthly payment. The formula is: DSCR = gross monthly rent divided by the total monthly payment (principal, interest, taxes, insurance and any HOA dues).

For example, a property that rents for $2,750 per month with a total payment of $2,500 has a DSCR of 1.10, meaning the rent covers 110% of the payment. A DSCR of 1.0 means the rent exactly covers the payment.

Why investors use DSCR loans

No personal income documentation. Qualification is based on the property's cash flow, which helps self-employed investors and those with complex tax returns.

Vesting in an LLC. Many DSCR programs allow you to close in the name of a business entity such as an LLC.

Portfolio scaling. Because approval is tied to each property's income rather than your debt-to-income ratio, DSCR loans can make it easier to grow a rental portfolio.

Tradeoffs. DSCR loans are for investment properties only, not primary residences, and rates and down payments are generally higher than conventional financing. We compare the numbers so you can see whether a DSCR loan or a conventional investment loan is the better fit.

DSCR Loan FAQs

What is a DSCR loan?

A DSCR (Debt Service Coverage Ratio) loan is a mortgage for investment properties that qualifies based on the property's rental income rather than the borrower's personal income. No tax returns or W-2s are required.

How is DSCR calculated?

DSCR equals the gross monthly rent divided by the total monthly payment, including principal, interest, taxes, insurance and any HOA dues. A DSCR of 1.10 means the rent covers 110% of the payment.

What DSCR ratio do I need?

Many programs require a minimum DSCR of 1.0, meaning the rent at least covers the payment. Some programs allow lower ratios with a larger down payment or higher rate.

What are the credit and down payment requirements for a DSCR loan?

Credit scores generally start around 620, and down payments are typically 20% to 25%. Stronger ratios and credit qualify for better terms.

Do DSCR loans require income documentation?

No. There are no tax returns, W-2s or employment verification. Qualification is based on the property's rental income alone.

Can I close a DSCR loan in an LLC?

Yes. Many DSCR programs allow you to vest the property in a business entity such as an LLC. DSCR loans are for investment properties, not primary residences.

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