Debt Service Coverage Ratio Loans (DSCR)

What Is a DSCR Loan?

A Debt Service Coverage Ratio (DSCR) loan is designed for real estate investors to qualify based on a property’s income rather than personal income. Lenders use the DSCR to determine if the property generates enough rental income to cover the mortgage payment.


DSCR Calculation:


  • DSCR = Gross Rental Income ÷ Debt Obligations
  • A DSCR of 1.0 means the property’s income covers the mortgage exactly.
  • Most lenders require a DSCR of 1.0 or higher, though some allow ratios below 1.0 with higher rates or down payments.


Down Payment & Credit Score Requirements


  • Minimum Down Payment: Typically 20–25%, depending on lender guidelines and DSCR ratio.
  • Minimum Credit Score: Generally 620 or higher, though some lenders may have more flexible options.


Mortgage Insurance


  • Not Required: DSCR loans do not require mortgage insurance, regardless of down payment size.


Unique Features of DSCR Loans


  • No Personal Income Verification: Borrowers are qualified based on property cash flow, making these loans ideal for investors with complex or non-traditional income.
  • Faster Closings: With less documentation required, DSCR loans can close quicker than traditional loans.
  • Unlimited Properties: Investors can use DSCR loans for multiple properties without traditional loan limits.


Property Types Allowed


  • Investment Properties Only: DSCR loans cannot be used for primary residences or second homes.
  • Short-Term & Long-Term Rentals: Suitable for properties rented on platforms like Airbnb or traditional leases.
  • Multi-Unit and Commercial Residential Properties: Properties with 1–4 units are typically eligible.


Assumability


  • Non-Assumable: DSCR loans generally cannot be transferred to another borrower.


Ideal Borrowers for DSCR Loans


  • Real estate investors seeking a simplified approval process.
  • Borrowers with high property income but complex or limited personal income documentation.
  • Investors looking to scale their rental property portfolio.


Contact Us for DSCR Loan Guidance

Whether you’re expanding your real estate investments or purchasing your first rental property, our team is here to help you navigate DSCR loans and find the best solution for your investment goals.