What is a DSCR loan?
A DSCR (Debt Service Coverage Ratio) loan is an investor mortgage that qualifies you based on the property's cash flow, not your personal income. There are no tax returns, no W-2s, no DTI calculation. The lender divides the property's Net Operating Income by the proposed mortgage payment — if the ratio hits their minimum, you qualify.
The formula: DSCR = NOI ÷ Annual Debt Service
A DSCR of 1.00 means the property exactly covers its mortgage. Most programs want 1.10 to 1.25 minimum, with best pricing at 1.25 and up.
Who DSCR loans are built for
- Full-time investors with 10+ financed properties who've hit conventional limits.
- Self-employed borrowers whose tax returns show low income after write-offs.
- Fast-moving buyers — DSCR closes in 21–35 days without income docs.
- LLC borrowers — DSCR loans close directly in an entity, which conventional usually does not.
What DSCR does not work for
- Primary residences (business-purpose only).
- Properties that won't cash flow at current rates (many high-appreciation markets).
- Rural or unique properties with weak comps.
Typical program terms (2026)
| Feature | Standard DSCR |
|---|---|
| Loan amount | $75k – $3M+ |
| LTV — purchase | up to 80% |
| LTV — cash-out refi | up to 75% |
| Minimum DSCR | 1.00–1.25 |
| Minimum FICO | 660–680 (best pricing 720+) |
| Term | 30-yr fixed, 5/6 ARM, 40-yr I/O |
| Prepay | 5-4-3-2-1 or 3-2-1 (buyable) |
| Reserves | 6 months PITI |
How to calculate your DSCR before you apply
- Gross rent — actual lease or appraiser's market rent (whichever is lower).
- NOI — subtract taxes, insurance, HOA, and management (~8%).
- Debt service — get a rate quote and calculate PITI.
- Divide NOI by debt service.
If you're at 1.00–1.10, consider: buying down the rate, choosing interest-only, or putting more down.
DSCR vs Conventional at a glance
- Conventional — best rate, tightest docs, personal-name, capped at 10 properties.
- DSCR — rate 0.75–1.5% higher, no income docs, LLC OK, unlimited properties.
For most investors past property #4, DSCR is the faster and simpler path.
Common mistakes
- Underwriting rent from Zillow. Use the appraiser's 1007 or actual leases — Zestimates are wrong.
- Ignoring the prepay. A 5-year prepay costs 5% of the balance if you refi or sell early — huge on a $500k loan.
- Forgetting reserves. Lenders want 6 months of PITI in the bank after closing.
Next steps
Pair DSCR with a rate lock 30–45 days before close. Start your file with lease, rent roll, insurance quote, and entity docs ready — a tight file closes in 21 days.