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DSCR Loans (Debt Service Coverage Ratio)

DSCR loans have revolutionized real estate investing by allowing qualification based on property income rather than personal income. This makes them ideal for self-employed investors, those with complex tax situations, or anyone scaling their portfolio quickly.

What Is a DSCR Loan?​

DSCR = Debt Service Coverage Ratio

It's a measurement of whether a property's rental income can cover its mortgage payment.

The Formula​

DSCR = Monthly Rental Income ÷ Monthly Mortgage Payment (PITIA)

Where PITIA = Principal + Interest + Taxes + Insurance + HOA (if applicable)

Example Calculation​

Property Address: 123 Main Street
Monthly Rent: $2,500
Monthly Payment (PITIA): $2,000

DSCR = $2,500 ÷ $2,000 = 1.25

Result: ✅ This property qualifies! (DSCR above 1.0)

Why DSCR Loans Are Game-Changing​

Traditional Loan Process:​

❌ Provide 2 years tax returns
❌ Prove W-2 income or business profit
❌ Calculate debt-to-income ratio
❌ Explain every deduction on tax return
❌ Limited to 10 financed properties

DSCR Loan Process:​

✅ No tax returns required
✅ No income verification
✅ No DTI calculation
✅ Property cash flow is what matters
✅ Unlimited properties

The property qualifies YOU, not the other way around!

DSCR Loan Requirements​

Minimum DSCR Ratio​

DSCR RatioQualification
Below 1.0❌ Negative cash flow - difficult to qualify
1.0⚠️ Break-even - some lenders accept with higher rate
1.0 - 1.24✅ Acceptable - standard DSCR rates
1.25+✅ Strong - best rates available
1.35+✅ Excellent - lowest rates

Most lenders require: 1.0 to 1.25 minimum DSCR

Credit Score Requirements​

Credit ScoreQualificationRate Impact
760+✅ ExcellentBest rates
720-759✅ Very GoodStandard rates
700-719✅ GoodSlightly higher
680-699✅ FairHigher rates
660-679⚠️ AcceptableMuch higher rates, 25% down
Below 660❌ DifficultFew lenders, hard money alternative

Sweet spot: 720+ for best pricing

Down Payment​

LTV (Loan-to-Value)Down PaymentNotes
75%25% downStandard for most DSCR loans
80%20% downAvailable with strong credit (740+) and DSCR 1.25+
70%30% downBetter rates, more equity cushion

Cash-out refinance: Usually limited to 75% LTV

Property Types​

Eligible Properties:

  • ✅ Single-family homes
  • ✅ 2-4 unit properties
  • ✅ Condos (warrantable)
  • ✅ Townhouses
  • ✅ Multi-family (5-8 units with some lenders)

Property Condition:

  • Must be rentable "as-is"
  • Turnkey or light cosmetic work
  • Some lenders allow minor repairs
  • Major rehabs need bridge/hard money first

Loan Limits​

Loan AmountAvailability
$100,000 - $150,000Minimum (varies by lender)
$150,000 - $1MStandard DSCR sweet spot
$1M - $3MAvailable, may need jumbo pricing
$3M+Portfolio/commercial loan territory

DSCR Rates & Terms​

Interest Rates (As of 2026)​

Current Rate Range: 7.5% - 10.5%

Rate Factors:

  • Credit score (biggest factor)
  • DSCR ratio
  • LTV
  • Property type
  • Loan amount
  • Lock period

Sample Pricing:

Scenario 1: Strong File
Credit: 760
DSCR: 1.35
LTV: 75%
Rate: 7.5% - 8.0%

Scenario 2: Average File  
Credit: 700
DSCR: 1.15
LTV: 75%
Rate: 8.5% - 9.0%

Scenario 3: Weaker File
Credit: 670
DSCR: 1.05
LTV: 75%
Rate: 9.5% - 10.5%

Loan Terms Available​

Fixed Rate:

  • 30-year fixed (most common)
  • 20-year fixed
  • 15-year fixed (lower rate)

Adjustable Rate (ARM):

  • 5/1 ARM, 7/1 ARM, 10/1 ARM
  • Lower initial rate
  • Fixed for 5, 7, or 10 years
  • Then adjusts annually

Interest-Only:

  • 10-year interest-only available
  • Lower monthly payment
  • Principal doesn't amortize
  • Requires higher DSCR (1.25-1.35)

Who Should Use DSCR Loans?​

Perfect For:​

1. Self-Employed Investors

  • Tax returns show low income (by design)
  • Write off everything legally possible
  • Can't prove traditional income
  • Property income tells the real story

2. High-Income W-2 Earners

  • Don't want to provide tax returns
  • Buying many properties quickly
  • Value speed and simplicity
  • Willing to pay slightly higher rate for convenience

3. Portfolio Builders

  • Already have 10 financed properties (conventional limit)
  • Scaling to 20, 30, 50+ properties
  • Need unlimited capacity
  • Focus on cash flow per door

4. Privacy-Focused Investors

  • Don't want to disclose personal finances
  • Separating personal and business
  • Building in LLC for liability protection
  • Keeping investment strategy confidential

5. Foreign Nationals

  • Don't have U.S. tax returns
  • Can't prove U.S. income
  • Have capital to invest
  • Property income is verifiable

DSCR vs. Conventional: Side-by-Side​

FeatureDSCR LoanConventional Loan
Tax Returns❌ Not required✅ Required (2 years)
Income Docs❌ Not required✅ W-2s, pay stubs
DTI Limit❌ No limit✅ Max 45-50%
Property Limit✅ Unlimited❌ Max 10
Qualification✅ Property cash flow❌ Personal income
Close in LLC✅ Yes❌ Usually no
Rates7.5% - 10.5%6.5% - 8.5%
Processing Time✅ 14-21 days⏳ 30-45 days
Best ForSelf-employed, scalingW-2, first properties

How DSCR Loans Work: Step-by-Step​

Step 1: Find Your Property​

  • Cash-flowing rental
  • Current lease or market rent estimate
  • Run DSCR calculation yourself

Step 2: Apply​

  • Basic application (10 minutes)
  • No tax returns!
  • No pay stubs!
  • Just ID, down payment proof, property info

Step 3: Property Evaluation​

  • Lender orders appraisal
  • Appraiser provides rent schedule
  • Or use current lease amount
  • DSCR calculated

Step 4: Underwriting​

  • Verify down payment funds
  • Check credit score
  • Review property
  • Calculate DSCR
  • 7-14 days typically

Step 5: Close​

  • Sign docs (can close in LLC)
  • Wire funds
  • Receive keys
  • Start collecting rent!

Total Timeline: 14-21 days from application to closing

Calculating DSCR: Deep Dive​

What's Included in Monthly Rent?​

Count:

  • ✅ Base rent (from lease)
  • ✅ Market rent (if vacant, from appraisal)
  • ✅ 75% of rent for multi-unit (some lenders)

Don't Count:

  • ❌ Security deposits
  • ❌ One-time fees
  • ❌ Pet deposits
  • ❌ Utilities (unless included in rent)

What's Included in PITIA?​

Principal & Interest:

  • Based on loan amount, rate, term
  • Lender calculates this

Taxes:

  • Annual property taxes ÷ 12
  • From tax bill or assessor website

Insurance:

  • Annual insurance premium ÷ 12
  • From your insurance quote

HOA (if applicable):

  • Monthly HOA or condo fees
  • From HOA documents

Sample DSCR Calculation​

Property: 4-unit apartment building
Address: 456 Elm Street

Rental Income:
Unit 1: $1,200/month
Unit 2: $1,200/month  
Unit 3: $1,250/month
Unit 4: $1,250/month
Total Gross Rent: $4,900/month

PITIA Calculation:
Purchase Price: $550,000
Down Payment (25%): $137,500
Loan Amount: $412,500
Interest Rate: 8.25%
Monthly P&I: $3,088

Property Taxes: $6,600/year = $550/month
Insurance: $1,800/year = $150/month
HOA: $0

Total PITIA: $3,088 + $550 + $150 = $3,788

DSCR = $4,900 ÷ $3,788 = 1.29

Result: ✅ STRONG DSCR! This deal qualifies easily.

Improving Your DSCR​

If Your DSCR Is Too Low:​

Option 1: Increase Down Payment

  • Lower loan amount = lower payment = higher DSCR
  • 30% down vs. 25% can make the difference

Option 2: Buy Rate Down

  • Pay points upfront to lower rate
  • 1 point = 1% of loan amount
  • Lowers monthly payment

Option 3: Choose Interest-Only

  • Much lower monthly payment
  • But requires higher starting DSCR (1.25-1.35)

Option 4: Negotiate Higher Rent

  • If below market, increase to market rate
  • Use comparable rent data

Option 5: Shop Insurance

  • Lower premium = lower PITIA = higher DSCR
  • Every $100/year saves $8/month

DSCR Loan Myths Debunked​

Myth #1: "DSCR loans are only for people with bad credit"​

Reality: Many investors with 750+ scores use DSCR for convenience and speed.

Myth #2: "Rates are way higher than conventional"​

Reality: About 1-2% higher, but worth it for no income docs and unlimited properties.

Myth #3: "You can't get approved with DSCR under 1.0"​

Reality: Some lenders accept 0.75-1.0 DSCR with strong credit and higher down payment.

Myth #4: "DSCR loans are hard money"​

Reality: DSCR loans are permanent financing (30-year fixed), not short-term bridge loans.

Myth #5: "You need perfect credit"​

Reality: 680-700 credit commonly accepted, some lenders down to 660.

Documents Needed for DSCR Loans​

Required (Short List!):

  • ✅ Photo ID
  • ✅ Down payment funds (bank statements)
  • ✅ Purchase contract
  • ✅ Lease agreement (or appraisal rent estimate)
  • ✅ Property insurance quote
  • ✅ LLC documents (if closing in entity)

NOT Required:

  • ❌ Tax returns
  • ❌ W-2s or pay stubs
  • ❌ Employment verification
  • ❌ DTI calculation

Full Document Checklist →

DSCR Loan Costs​

Typical Closing Costs​

Cost ItemAmountNotes
Origination Fee1-2%Lender fee
Appraisal$500-$700Higher for multi-unit
Credit Report$50-$100Per borrower
Title InsuranceVariesBased on purchase price
Escrow/Attorney$500-$1,500State-dependent
Recording Fees$100-$300County fees
Prepaid Insurance1 yearVaries widely
Prepaid Taxes3-6 monthsDepends on timing

Total: Typically 2-4% of loan amount

Get Pre-Qualified for a DSCR Loan​

MoneyMatcher makes it easy:

  1. Apply in 5 minutes - Basic info only
  2. Soft credit pull - Doesn't affect score
  3. Get matched - 3-7 DSCR lenders
  4. Compare rates - Side-by-side
  5. Choose best fit - Your decision

Start Your DSCR Application →

DSCR Success Stories​

"I'm a software engineer who flips and rents properties on the side. My tax returns show losses (depreciation and write-offs), but my rentals all cash flow. Banks kept denying me. DSCR loans changed everything - I've financed 8 properties in 18 months." - Tom R., Seattle

"As a 1099 contractor, my income varies wildly. Conventional lenders couldn't make sense of it. With DSCR, I just showed my property cash flows positive, and I was approved in 2 weeks." - Maria S., Phoenix

"I hit the 10-property limit with Fannie Mae. DSCR opened the door to keep scaling. Now I'm at 23 properties and growing." - James K., Atlanta

Ready for a DSCR Loan?​

Quick Self-Assessment:​

You're a GREAT fit for DSCR if:

  • ✅ Self-employed or complex income
  • ✅ Property cash flows (DSCR 1.0+)
  • ✅ 20-25% down payment ready
  • ✅ Credit score 680+
  • ✅ Want to close quickly (14-21 days)
  • ✅ Building a portfolio (multiple properties)

Get Matched with DSCR Lenders →

Free pre-qualification. No tax returns required. DSCR calculated for you.

Learn More​

Questions?​

Get matched with DSCR lenders today! → Apply Now