What is a DSCR loan?
A Debt Service Coverage Ratio loan is a business-purpose mortgage for rental property. The lender typically compares qualifying monthly rent with the property's monthly housing expense. Because the analysis centers on the property, personal income documents such as W-2s and tax returns may not be required.
Who may benefit?
- Investors whose tax returns do not reflect their current cash flow
- Self-employed borrowers who want to avoid personal income calculation
- Owners expanding a rental portfolio
- Investors purchasing through an eligible LLC or other entity
- Borrowers seeking purchase, rate-and-term refinance or cash-out financing
How the ratio works
DSCR is generally calculated by dividing qualifying rent by the property's qualifying monthly expense. A ratio of 1.00 means the rent equals the expense. Some programs can consider ratios below 1.00, and select no-ratio options may not require the property to meet a minimum DSCR at all. Lower-ratio or no-ratio programs commonly involve different down-payment, pricing, reserve or credit requirements, so the full scenario matters.
Read the guide to DSCR loans below 1.00 →
Information helpful for an initial review
- Property address, estimated value and purchase price
- Expected or current monthly rent
- Estimated taxes, insurance and association dues
- Requested loan amount and cash-out goal
- Credit range, investment experience and available reserves
Questions worth comparing
Rate is only one part of a DSCR quote. Ask about points, lender fees, prepayment penalties, interest-only options, appraisal rent schedules, short-term rental treatment, entity vesting and reserve requirements.