DSCR Loans for Real Estate Investors

A DSCR loan (Debt Service Coverage Ratio loan) is a type of investment property loan that evaluates the property’s ability to generate enough rent income to cover mortgage payments and expenses. Instead of relying on personal income, DSCR loans focus on the property’s cash flow — making them ideal for investors who want to grow rental portfolios without traditional income documentation. 

With a DSCR loan, lenders calculate the ratio by dividing a property’s rental income by the total debt payments (PITIA: principal, interest, taxes, insurance, and association fees). A DSCR of 1.0 or higher generally shows that rental income can cover the mortgage obligation.   This holds true for most lender whom lend on 1-8 unit residential dwellings.  Commercial lenders lending on 9+ units often use a similar formula but use NET Operating Income (versus gross rents) compared to total payment and the minimum DSCR is usually 1.25 or greater.

For example, if a single family residential property generates $2,000 in monthly rent, and the monthly mortgage payment is $1,800, the DSCR would be 1.11 — which many lenders view as a qualifying cash-flow ratio. 

Purchase DSCR Loans: Use DSCR financing to acquire rental properties using the rental income potential of the property, not your paycheck.

Refinance DSCR Loans: Refinance existing investment properties to improve cash flow, lower payments, or pull equity out for future investments. 

• Qualify based on property cash flow, not personal income 
• No minimum employment documentation required 
• Often no traditional DTI calculation 
• Works for single-family and multi-family investment properties 
• Flexible terms (often up to 30 or 40 years) and offer features such as interest only periods.  Can be Fully Amortized with fixed interest rates or an Adjustable Rate Mortgage (ARM). 
• Used for purchase, refinance, or cash-out strategies on properties that are rent ready or currently rented out.  Properties needing extensive repairs or renovations do not normally qualify.

DSCR loans are best suited for real estate investors with rental properties that produce steady rental income. Typically lenders consider:

• Property cash flow sufficient to cover mortgage payments
• Adequate reserves to support down payment + closing costs
• Property appraisal supporting fair market rent
• Credit profile and property type requirements vary by loan program
• Seasoning requirements for refinances.  Many lenders require 6 months or more on title before qualifying for a cash out refi.  We work with several BRRRR friendly lenders who have zero or as little as 3 months of seasoning required.

• Building a rental portfolio using rental income to qualify 
• Refinance existing rentals to lower monthly payments or access equity 
• Acquire multi-family or small apartment buildings 
• Investors who are self-employed or without traditional income verification 
• Have met or exceeded the Conventional lending cap of 10 total properties financed.
• To refinance after completing a Fix and Flip property.  Many investors choose to hold long term as a rental.

If a Purchase Transaction:

• The full address of the property you intend to purchase
• The purchase price or amount you will offer
• Current Rents in place, or an estimated amount of rent that will be collected if currently vacant
• Current Annual Property Taxes
• Current Annual Insurances
• Current HOA Fees, if any
• How title will be held (as individual, entity, or trust)
• Borrower's estimated FICO scores
• Borrower's experience owning or selling rentals in the past 36 months
• Borrower's current liquidity

For Refinance Transactions:

• The full address of the property you intend to refinance
• The purchase price you paid and date of original acquisition
• Amount of rehab spent on improvements since acquisition, if any
• Current Debt owed on the property
• Current Rents in place, or an estimated amount of rent that will be collected if currently vacant
• Current Annual Property Taxes
• Current Annual Insurances
• Current HOA Fees, if any
• How title is currently held (as individual, entity, or trust)
• Borrower's estimated FICO scores
• Borrower's experience owning or selling rentals in the past 36 months
• Borrower's current liquidity

Please visit our comprehensive FAQ page for more info or complete our Quick App to get your quote started now.