DSCR Loan — Qualify on Your Property's Rental Income

A DSCR loan qualifies you on what the property earns, not what you earn. No W-2. No tax returns. No personal income verification. If the rent covers the mortgage, you can qualify — the most direct path for real estate investors who don't fit the conventional box.

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Buying an investment property conventionally? Compare investment property rates

Rental duplex financed with a DSCR loan

What Is a DSCR Loan?

DSCR stands for Debt Service Coverage Ratio. It's the number that tells a lender whether a rental property generates enough income to cover its own mortgage payment. A DSCR loan uses that ratio as the qualifying standard — your personal income is largely irrelevant.

The formula is simple: DSCR = Gross Monthly Rent ÷ Monthly PITIA (principal, interest, taxes, insurance, and HOA). A DSCR of 1.20 means the property earns 20% more than it costs to carry. Most lenders require 1.0 to 1.25 at minimum.

DSCR loans are a type of non-QM (non-qualified mortgage) — they fall outside Fannie Mae and Freddie Mac guidelines. The lender holds the loan or sells to a private investor, which is why they can underwrite on rental income instead of personal income.

DSCR loan at a glance

Income docsNone — property rent replaces personal income
How you qualifyGross rent ÷ monthly payment ≥ 1.0–1.25
Down payment20–25% on a purchase
Credit score620 minimum; 680+ for better rates
Rate vs conventionalTypically 1–2.5% higher
PropertiesNo cap on number of financed properties
Prepay penaltyCommon — typically 3–5 year step-down
Best forReal estate investors — SFR, 2–4 units, STR

How the DSCR Ratio Works

The ratio tells you — and the lender — whether the property pays for itself. Run this before you make an offer.

DSCR above 1.25Strong

Property earns 25%+ more than the payment. Unlocks better rates and more lender options.

DSCR 1.0–1.25Qualifies

Rent covers the payment or slightly exceeds it. Most lenders approve; expect higher rates.

DSCR below 1.0Difficult

Rent doesn't cover the payment. A handful of lenders allow 0.75+ with strong credit and reserves.

Example calculation

The property:

Purchase price$320,000
Down payment (25%)$80,000
Monthly market rent$2,200

The payment (PITIA):

Principal + interest$1,520
Taxes + insurance$360
Total PITIA$1,880
DSCR$2,200 ÷ $1,880 = 1.17

Typical DSCR Loan Requirements

Requirements vary by lender — DSCR is not a standardized government-backed product. These are typical ranges across non-QM lenders.

Minimum DSCR1.0–1.25 (some lenders allow 0.75 with compensating factors)
Credit score620 minimum; 680+ for better pricing
Down payment20–25% on a purchase
Loan amountsTypically $100K–$3M+, varies by lender
Property typesSingle-family, 2–4 units, condos, short-term rentals
Loan purposePurchase, rate-term refinance, or cash-out refinance
Rate vs conventionalTypically 1–2.5% higher
Prepayment penaltyCommon — usually a 3–5 year step-down structure

Who DSCR Loans Work Well For

DSCR is an investor-only product — you cannot use it for a property you plan to live in. Within that constraint, it works well for a wide range of investors.

Self-employed investors

Your write-offs reduce taxable income — but DSCR doesn't care about your tax return. If the property cash-flows, you can qualify.

Landlords scaling a portfolio

Conventional lenders cap financed properties at 10. Most DSCR lenders have no cap — each property qualifies on its own income.

Short-term rental operators

Airbnb and VRBO income can be used to qualify. Lenders typically use a 12-month average from the platform, or market rent from an appraiser.

Investors who need speed

No income docs means a simpler underwrite. Some DSCR lenders can close in 2–3 weeks — useful in competitive markets.

DSCR Loan Pros and Cons

Advantages

  • No W-2, no tax returns, no personal income verification required
  • No cap on number of financed properties — scale your portfolio
  • Qualifies on current market rent if the property is vacant (via appraisal)
  • Works for LLCs and other entity structures
  • Faster underwriting than full-doc loans — no income docs to verify

Trade-offs to understand

  • Rate is 1–2.5% higher than a comparable conventional loan
  • Down payment typically 20–25% — no low-down options
  • Prepayment penalties common — selling or refinancing early can be costly
  • Owner-occupied properties do not qualify — investment only
  • Vacancy risk: rent covers the payment in theory, not in practice when units are empty

Get Matched with DSCR Lenders

Takes about 2 minutes · No credit check · No obligation

DSCR lenders vary significantly on minimum ratio, credit requirements, rates, and prepayment terms. Connect with lenders who work with investor loans and compare your options.

  • NMLS-licensed lenders
  • Secure & confidential
  • No credit check

How it works

  1. 1Enter your info — takes about 2 minutes
  2. 2Get matched with DSCR lenders for your investment property
  3. 3Compare options and see what you qualify for
Get your answer

If the Property Cash-Flows, You Can Likely Qualify

DSCR loans exist because not every investor has W-2 income that looks right on paper. If your rental property covers its own mortgage, connect with a lender who works with DSCR programs and find out what you actually qualify for.

See if I qualify
Real estate investor in front of their rental property

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Related Resources

DSCR deep dive

How the ratio is calculated, edge cases, prepayment penalties, and how to put your best application forward.

Read guide

Non-QM loans

The full category — DSCR, bank statement, asset depletion, 1099, and more. See all the alternative income paths.

See all non-QM types

Investment property rates

Compare conventional investment property loan rates. Lower rates than DSCR if you qualify on personal income.

Compare rates

Bank statement loans

Self-employed and buying a primary residence? Bank statement loans may be a better fit than DSCR.

See bank statement loans

Key Terms

DSCRGross monthly rent ÷ monthly PITIA. The ratio that determines whether a property qualifies for a DSCR loan.Non-QM loanA mortgage outside Fannie/Freddie guidelines — qualifies on alternative documentation like rental income or bank statements.LTVLoan amount ÷ property value. Lower LTV (larger down payment) improves your rate and DSCR approval odds.PITIAPrincipal, interest, taxes, insurance, and HOA. The denominator in the DSCR calculation.Qualified mortgage (QM)The standard Fannie/Freddie loan. DSCR sits outside this framework — different underwriting, higher rate.Bank statement loanAlternative qualifying method for self-employed borrowers — deposits replace tax returns as income documentation.

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