What is a Debt Service Coverage Ratio (DSCR) Loan?
A Debt Service Coverage Ratio (DSCR) Loan is a mortgage designed for real estate investors who want to qualify based on rental income rather than personal income. Unlike traditional loans that require W-2s, tax returns, or pay stubs, a DSCR loan is approved based on whether the property’s rental income can cover the mortgage payment.
Why consider a DSCR Loan?
DSCR loans make it easier for investors to finance rental properties without using personal income verification. Key benefits include:
No personal income verification required – Qualification is based on the rental income generated by the property, not the borrower’s job income.
Easier approval process for investors – Avoid the strict tax return and W-2 requirements of traditional loans.
Financing available for multiple properties – Investors can qualify for multiple rental properties without financial strain.
Competitive loan amounts and flexible terms – Available for single-family homes, condos, multi-unit properties, and short-term rentals.
Fast and streamlined closing process – Ideal for investors who need quick funding to secure properties.
A DSCR loan is a smart financing solution for investors looking to expand their real estate portfolio without traditional income verification hassles.
How DSCR Loans Work
DSCR loans evaluate a property’s ability to generate enough rental income to cover the mortgage. The Debt Service Coverage Ratio (DSCR) measures the relationship between rental income and mortgage expenses.
How Do You Qualify for a DSCR Loan?
No W-2s or tax returns required – Qualification is based solely on rental income.
Property must generate enough income – Lenders look for a DSCR of 1.0 or higher, meaning rental income covers at least 100% of the mortgage payment.
Credit score requirements vary – Most lenders require a minimum 640-680 credit score.
Down payment requirements range from 15-25%, depending on the property type and DSCR ratio.
Eligible property types include single-family rentals, multi-units, and short-term Airbnb properties.
How DSCR is Calculated
DSCR = Gross Rental Income ÷ Total Monthly Mortgage Payment
DSCR ≥ 1.25 – Strong cash flow, easier approval, and better loan terms.
DSCR = 1.0 – Property generates just enough income to cover mortgage payments.
DSCR < 1.0 – Property does not produce enough rental income; additional requirements may apply.
Who Should Consider a DSCR Loan?
DSCR loans are ideal for:
Real estate investors who want to finance rental properties without W-2s or tax returns.
Buy-and-hold investors looking to expand their portfolio with multiple properties.
Short-term rental investors (Airbnb, VRBO) needing flexible mortgage financing.
Self-employed or business owners who don’t show enough taxable income on tax returns.
With no personal income verification, flexible qualification terms, and investment-focused lending, DSCR loans offer an excellent financing solution for real estate investors looking to grow their portfolio with minimal documentation.
