🏢 What is a DSCR Loan?

A DSCR Loan (Debt Service Coverage Ratio Loan) is a type of mortgage designed for real estate investors. Instead of using personal income to qualify, lenders look at the property's ability to generate rental income.

📊 What is DSCR?

DSCR stands for Debt Service Coverage Ratio. It measures how well a property’s income can cover its debts. The formula is:

DSCR = Net Operating Income (NOI) ÷ Debt Obligations

For example, if a property brings in $2,000/month in rent and the mortgage is $1,600/month, the DSCR is: 1.25. That means the income covers the debt 1.25 times.

🎯 Who Are DSCR Loans For?

  • Real estate investors
  • Borrowers with complex or limited income documentation
  • Clients buying or refinancing rental properties
  • People looking to scale their property portfolios

✅ Key Benefits

  • No personal income or tax returns required
  • Qualification based on rental cash flow
  • Great for LLCs and seasoned investors
  • Can close faster than traditional loans

⚠️ Things to Watch Out For

  • Higher interest rates than traditional loans
  • Minimum DSCR requirements vary by lender (typically 1.00 or higher)
  • Typically requires 20–25% down payment
  • Only available for investment properties

📁 Documents Commonly Required

  • Lease agreements or rent rolls
  • Property operating statements
  • Appraisal with market rent analysis
  • Business entity documents (if buying through an LLC)

Tip: Some lenders allow DSCRs under 1.0 with compensating factors like high credit, reserves, or a large down payment.