What Is a DSCR Loan?
A DSCR (Debt Service Coverage Ratio) loan is an investment property mortgage where qualification is based on the property's rental income rather than the borrower's personal income. If the property's rent covers the mortgage payment, the borrower can qualify — no W-2s, tax returns, or employment verification required. DSCR loans are popular with real estate investors, self-employed borrowers, and anyone building a rental portfolio.
Key Facts
How Is DSCR Calculated?
The Debt Service Coverage Ratio is calculated by dividing the property's gross monthly rental income by its total monthly debt obligation — including principal, interest, taxes, insurance, and HOA dues (PITIA). For example, if a property rents for $2,500/month and the total PITIA is $2,000/month, the DSCR is 1.25x. A DSCR of 1.0 means rent exactly covers the payment. Above 1.0 indicates positive cash flow.
Who Qualifies for a DSCR Loan?
DSCR loans are designed for real estate investors purchasing or refinancing rental properties. They're especially popular with self-employed borrowers whose tax returns understate their income, investors scaling a portfolio without repeatedly documenting personal income, Airbnb and short-term rental operators, and borrowers who want to vest property in an LLC. There is no limit on the number of properties you can finance.
DSCR Loan vs. Conventional Loan
Conventional investment property loans require full income documentation (W-2s, tax returns, pay stubs) and count against the 10-financed-property limit. DSCR loans skip all personal income documentation and have no property count limit. The trade-off: DSCR loans typically require 20-25% down payment and carry slightly higher rates than conventional, but the qualification flexibility makes them the preferred choice for serious investors.
What Properties Qualify?
DSCR loans can be used for single-family homes, 2-4 unit properties, condos (warrantable and non-warrantable), townhomes, and 5+ unit multifamily. Both long-term rentals and short-term rentals (Airbnb, VRBO) are eligible, though short-term rental income documentation requirements vary by lender. Properties must be non-owner-occupied investment properties.
Licensed in Oregon & California · NMLS #1498678
From the Blog
Further Reading
InvestmentDSCR Loans Explained: How Real Estate Investors Qualify Without Tax Returns
If you're a real estate investor with strong rental income but complex taxes, a DSCR loan might be your best financing option. Here's exactly how they work and who they're designed for.
InvestmentDSCR Loans: Close Fast, Lock In Up to 40 Years, and Use Interest-Only to Buy Deals Others Can't
DSCR loans are the most strategically powerful tool available to real estate investors — fast closings, competitive rates, guaranteed fixed payments for up to 40 years, and interest-only options that let savvy buyers acquire underperforming properties, keep minimum payments low while rents rise, then refinance into equity. Here's the complete playbook.
InvestmentDSCR Loans and the BRRRR Strategy: Low-Cost Permanent Financing After Renovation with Interest-Only Payments and 40-Year Fixed Terms
The BRRRR strategy only works if the refinance step actually pencils. Hard money got you in, your renovation created the value — now a DSCR loan with interest-only minimum payments and a 40-year fixed rate gives you the lowest-cost permanent financing available, returns your capital, and sets up the next acquisition.