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What is DSCR?

DSCR (Debt Service Coverage Ratio) is a revolutionary loan qualification method that focuses on a property's income rather than your personal income.

The Simple Explanation​

Imagine you want to buy an investment property, but your tax returns don't reflect your true earning potential. Maybe you're self-employed and write off expenses. Traditional lenders would reject you.

DSCR loans solve this problem.

Instead of asking "How much do you earn?", DSCR lenders ask "How much will this property earn?"

If the property's rental income covers the mortgage payment (plus taxes, insurance, and HOA), you qualify.

The DSCR Formula​

DSCR = Monthly Rental Income ÷ Monthly Payment (PITIA)

Where PITIA = Principal + Interest + Taxes + Insurance + Association dues

Example:​

  • Monthly Rent: $2,500
  • Monthly PITIA: $2,000
  • DSCR = $2,500 ÷ $2,000 = 1.25

A DSCR of 1.25 means the property generates 25% more income than needed to cover the mortgage.

Why DSCR Revolutionized Real Estate Investing​

Before DSCR Loans (The Old Way)​

Traditional investment property loans required:

  • 2 years of tax returns
  • W-2s from employers
  • Pay stubs
  • Complex debt-to-income calculations

The problem? Many successful investors couldn't qualify:

  • Self-employed investors who minimize taxable income
  • High-volume investors whose DTI maxed out
  • Business owners with irregular income
  • Foreign nationals without U.S. tax history

After DSCR Loans (The New Way)​

DSCR lending asks one simple question:

"Does this property make money?"

If yes, you're approved. No tax returns. No income verification. No DTI limits.

Who Benefits Most from DSCR Loans?​

1. Self-Employed Investors​

Your tax returns show low income due to deductions. DSCR lenders see a strong investment property.

2. High-Volume Investors​

You already own 10+ properties and DTI is maxed. DSCR looks at each property individually.

3. Foreign Nationals​

No U.S. tax returns? No problem. If the property cash flows, you qualify.

4. Real Estate Professionals​

Agents and brokers who understand property values but have irregular income.

5. FIRE Movement Followers​

Scale your portfolio faster without income documentation barriers.

DSCR vs. Traditional Income Verification​

FactorTraditional LoanDSCR Loan
Tax Returns2 years requiredNot required
W-2s/Pay StubsRequiredNot required
DTI CalculationMust be under 43-50%No DTI limit
# of PropertiesLimited (usually 10)Unlimited
Approval Speed30-45 days14-21 days
FocusYour incomeProperty's income

Common Misconceptions​

Myth 1: "DSCR loans have terrible rates"​

Reality: Rates are 0.5-1% higher than conventional, but speed and flexibility make up for it.

Myth 2: "You need perfect credit"​

Reality: Many programs accept 620-660 credit scores.

Myth 3: "Only for experienced investors"​

Reality: First-time investors can qualify with higher down payment and reserves.

Myth 4: "Property must have tenants"​

Reality: Appraisers provide market rent estimates for vacant properties.

Is DSCR Right for You?​

DSCR is ideal if:

  • ✅ You want to invest in rental properties
  • ✅ Your tax returns don't reflect true income
  • ✅ You're self-employed or have complex finances
  • ✅ You already own multiple properties
  • ✅ You want to scale quickly

Traditional loans might be better if:

  • ❌ You're buying a primary residence
  • ❌ You have W-2 income and low property count
  • ❌ You want the absolute lowest rate

Ready to Learn More?​

MoneyMatcher.io specializes in connecting investors with DSCR lenders. Start your application