A DSCR (debt service coverage ratio) loan qualifies an investment property on its rental income instead of your personal income. DSCR equals monthly rent divided by the monthly payment including taxes, insurance and HOA. Many lenders want 1.0 or higher; some allow lower ratios with larger down payments. DSCR loans are for business-purpose investment properties only.
DSCR math
Rent of $3,000 and a full payment (principal, interest, taxes, insurance, HOA) of $2,600 gives a DSCR of 1.15 ($3,000 ÷ $2,600). Rent is usually taken from a lease or the appraiser's market rent schedule; some lenders accept short-term rental data.
- No personal tax returns or W-2s for qualifying income.
- Close in an LLC at many lenders.
- 1–4 units, condos and some 5–8 unit properties depending on lender.
Conventional investor loans remain an option and often price better when your tax returns support the purchase.
Common questions
Can I live in a property bought with a DSCR loan?
No. DSCR loans are business-purpose loans for investment properties only.
What DSCR do lenders require?
Many lenders want 1.0 or higher. Some go below 1.0 with more down payment or reserves.