If you own or want to buy rental property, qualifying for a traditional mortgage can get harder with every door you add. Tax returns, debt-to-income limits, and personal income documentation all become obstacles, especially for self-employed investors or anyone whose returns show heavy depreciation. Understanding how DSCR loans work can open a simpler path.
DSCR loans were built for this situation. Instead of asking how much you earn, a DSCR lender asks whether the property earns enough to cover its own payment. This guide explains how DSCR loans work, how to calculate the ratio, what lenders require, and how investors use these loans to buy, refinance, and scale rental portfolios.
What Is a DSCR Loan?
DSCR stands for debt service coverage ratio. A DSCR loan is a long-term rental property loan that qualifies primarily on the property’s rental income compared with its monthly debt payment. Your personal income is not the main test. With our Rental (DSCR) loans, there is no personal income verification.
DSCR loans are for non-owner-occupied investment properties, and they are typically made to a business entity such as an LLC rather than to an individual.
How DSCR Loans Work: Calculating the Ratio
The basic formula is simple:
DSCR = monthly rental income ÷ monthly debt payment
The monthly debt payment usually includes principal, interest, property taxes, insurance, and any HOA dues, often abbreviated as PITIA. Lenders can differ on exactly which items they include. We’ll walk through how the ratio is calculated for your property on your first call.
A simple example
Say a single-family rental brings in $2,100 per month, and the full monthly payment (PITIA) on the new loan would be $1,850.
$2,100 ÷ $1,850 = 1.14 DSCR
That means the property’s rent covers the payment 1.14 times. Our single-property rental program requires a minimum DSCR of 1.05x, so on this simple calculation, the example would be above the minimum.
What the number means
- Above 1.0: the rent more than covers the payment.
- Exactly 1.0: the rent covers the payment with nothing left over.
- Below 1.0: the rent does not fully cover the payment.
Which rent counts
Lenders are often conservative about the rent figure they use. On our rental portfolio loans, leased units are counted at the lower of in-place rent and market rent, and unleased units at 90% of market rent. Our bridge loan’s DSCR exit option similarly uses the lower of in-place or market rent. Single-property rental purchases may be vacant.
DSCR Loan Requirements: Our Rental Loan Terms
Requirements vary from lender to lender. Here are the key terms of our single-property Rental (DSCR) program:
- Rates starting at 5.39%
- Term: 30 years
- Rate types: fixed and adjustable options
- Amortization: fully amortizing or partial interest-only
- Loan purpose: purchase, rate-and-term refinance, or cash-out
- Minimum FICO: 660
- Minimum DSCR: 1.05x
- Maximum LTV: 80% on purchases and rate-and-term refinances; 75% on cash-out
- Loan amounts: $75K to $2M
- Property types: single-family, 2–4 units, condos, townhomes, and PUDs
- Borrower: entity required; full recourse
- Foreign nationals: eligible up to 65% LTV
See every program side by side on our loan programs page.
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What Lenders Look at Besides DSCR
Credit
Even without income verification, your credit still matters. Our minimum FICO is 660 for single-property rental loans and 680 for portfolio loans. Stronger credit can help with pricing. Our pre-qualification uses a soft credit pull, so checking your options has no impact to your credit.
Down payment and leverage
At up to 80% LTV on a purchase, you would bring at least 20% down plus closing costs. A larger down payment lowers the loan amount and the monthly payment, which also raises your DSCR.
Property type and location
The property must be an eligible residential investment property. Our portfolio program excludes rural properties and vacation or seasonal rentals. We’ll confirm eligibility for your specific property up front.
How Investors Use DSCR Loans
Buying a rental
DSCR loans can finance a rental purchase without your personal income documentation. Because purchases may be vacant, you do not need a tenant in place to apply.
Refinancing out of a short-term loan
A common strategy is to buy and renovate with a fix and flip or bridge loan, place a tenant, then refinance into a 30-year DSCR loan. This replaces short-term financing with a long-term payment that the rent supports.
Cash-out refinancing
If a rental has built equity, a cash-out refinance of up to 75% LTV can free up capital for your next project while you keep the property.
Financing multiple rentals at once
If you own several rentals, a portfolio loan can combine them under one blanket loan. Our portfolio program requires a 680 minimum FICO, 1.05x minimum DSCR, at least 90% occupancy by unit count, a $72K minimum property value, and loans up to $2M. To use the current value instead of your cost basis, properties need 90 days of seasoning.
Pros and Cons of DSCR Loans
Advantages:
- No personal income verification
- Qualifying is based on how the property performs
- 30-year term with fixed or adjustable options
- Can be held in an LLC
- Works for purchases, refinances, and cash-out
Trade-offs:
- Rates are typically higher than owner-occupied mortgages
- Down payments are typically larger than on owner-occupied loans
- The property’s rent has to support the payment
- Full recourse, so liability is not limited to the property
How to Improve Your DSCR
- Put more money down. A smaller loan means a smaller payment.
- Support market rent. Current leases and rent comparables help show what the property earns.
- Shop insurance and review taxes. Lower expenses in the payment improve the ratio.
Frequently Asked Questions
Do DSCR loans require tax returns or pay stubs?
Our Rental (DSCR) loans do not require personal income verification. Qualifying is based on the property’s rental cash flow, along with your credit and the property itself.
What is a good DSCR for a rental property loan?
Anything above 1.0 means the rent more than covers the payment. Our single-property rental loans require at least 1.05x, and our bridge loan’s DSCR exit option requires 1.10.
Can I get a DSCR loan on a vacant property?
On our single-property rental loans, purchases may be vacant. Portfolio loans require at least 90% occupancy by unit count.
What credit score do I need for a DSCR loan?
Our minimum FICO is 660 for single-property rental loans and 680 for rental portfolio loans. Approval is subject to full underwriting.
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This article is for general informational purposes only and is not an offer or commitment to lend. All loans are subject to underwriting and approval, and terms are subject to change.