A DSCR loan is a long-term loan for rental property that's qualified on the property's income instead of yours. DSCR stands for debt service coverage ratio: how well the rent covers the loan payment. No tax returns, no pay stubs, no debt-to-income ratio.
How DSCR is calculated
DSCR = monthly rent ÷ monthly payment. The payment includes principal, interest, property taxes, insurance, and any HOA dues (often called PITIA).
| Monthly rent | Monthly payment | DSCR |
|---|---|---|
| $2,000 | $2,000 | 1.00 |
| $2,400 | $2,000 | 1.20 |
| $2,500 | $2,000 | 1.25 |
Most lenders look for a DSCR of 1.0 or higher. Some go lower with more money down. A higher ratio usually means better pricing.
What else lenders look at
- Credit: many DSCR lenders look for 660+.
- Leverage: up to about 80% of value on a purchase, 75% on a cash-out refinance.
- Reserves: a few months of payments in the bank after closing.
- The entity: loans usually close in an LLC or corporation.
When a DSCR loan makes sense
- You're self-employed or your tax returns don't show your real income.
- You're growing a portfolio and want each property to qualify on its own.
- You've renovated a property with a bridge loan and want to refinance into long-term financing.
Check a rental in seconds with the DSCR calculator, then request pre-approval.