DSCR Loans — Qualify on Rental Income, Not Your W-2
DSCR (Debt Service Coverage Ratio) loans are the #1 financing tool for real estate investors. Instead of verifying your personal income, we qualify the loan based on the property’s rental income vs. its debt payment. If the property cash flows, you qualify — no tax returns, no W-2s, no pay stubs required.
DSCR Loan Highlights
- No personal income documentation — no tax returns, no W-2s
- Qualify using the property’s rental income
- DSCR as low as 1.0 (breakeven cash flow)
- Up to 80% LTV on purchase, 75% on cash-out refi
- Loan amounts from $75,000 to $5M+
- 30-year fixed, 5/1 ARM, 7/1 ARM, interest-only options
- Single-family, 2–4 units, condos, short-term rentals (Airbnb/VRBO)
- LLC and individual borrowers eligible
- Close in 14–21 business days
- Available in 45 states
How DSCR Is Calculated
DSCR = Monthly Gross Rent ÷ Monthly PITIA (Principal + Interest + Taxes + Insurance + HOA). A DSCR of 1.25 means the property earns 25% more than it costs.
Strong DSCR — 1.35
Rent: $2,700/mo
Payment: $2,000/mo
DSCR: 1.35 ✅ Best rates
Qualifying DSCR — 1.05
Rent: $2,100/mo
Payment: $2,000/mo
DSCR: 1.05 ✅ Approved
Breakeven — 1.0
Rent: $2,000/mo
Payment: $2,000/mo
DSCR: 1.0 — ask us, some programs OK
Below 1.0
Rent: $1,800/mo
Payment: $2,000/mo
DSCR: 0.90 — may qualify with larger down payment
DSCR Loan Terms
| Feature | Typical Terms |
|---|---|
| Max LTV (purchase) | Up to 80% |
| Max LTV (cash-out refi) | Up to 75% |
| Min DSCR | 1.0 (some programs below 1.0) |
| Loan term | 30-yr fixed, 5/1 or 7/1 ARM, interest-only |
| Interest rate | 7.5% – 10% (varies by DSCR, LTV, credit) |
| Minimum loan | $75,000 |
| Maximum loan | $5M+ (case by case above $3M) |
| Close time | 14–21 business days |
| Income docs | None |
| Credit minimum | 620 FICO (680+ for best rates) |
| Entity eligible | LLC, LP, individual |
DSCR vs. Conventional Rental Loan
| Feature | DSCR Loan | Conventional Rental Loan |
|---|---|---|
| Income docs required | None | 2 years W-2 + tax returns |
| Self-employed friendly | Yes — no income reviewed | Often difficult |
| Max properties financed | Unlimited | Typically 10 (Fannie/Freddie) |
| LLC eligible | Yes | No (Fannie/Freddie require individual) |
| LTV (purchase) | Up to 80% | Up to 80% |
| LTV (cash-out) | Up to 75% | Up to 75% |
| Loan limits | $75K – $5M+ | Conforming limits apply |
| Close time | 14–21 days | 30–45 days |
Short-Term Rental DSCR
Own an Airbnb or VRBO? We can use 12 months of actual STR income from your hosting platform statements, or a market STR rental analysis from the appraisal, to calculate your DSCR. No long-term lease required. STR income is annualized and divided by 12 to get a monthly qualifying figure.
STR DSCR programs are available on eligible single-family properties and condos in markets with verifiable short-term rental demand.
Using DSCR to Scale a Portfolio
DSCR loans have no limit on the number of financed properties. Conventional Fannie/Freddie loans cap you at 10 properties. With DSCR, you can own 50 rentals and qualify for each new one independently — as long as each property cash flows. This is the primary reason serious portfolio landlords use DSCR almost exclusively after hitting the conventional limit.
Many investors run a strategy of: buy with hard money (fast, flexible) → stabilize and rent → refinance to DSCR (30-year fixed, lower rate) → repeat. The DSCR exit is what makes the BRRRR strategy sustainable at scale.
DSCR Loan FAQ
Can I use market rent instead of actual rent to qualify?
Yes. If the property is between tenants or was recently purchased, we use the market rent schedule provided by the appraiser — a survey of what comparable properties rent for in your market. This is standard practice in DSCR underwriting. An active lease is helpful but not required.
What’s the minimum DSCR to qualify?
Most programs require a minimum DSCR of 1.0 — meaning the property’s rent at least equals its monthly payment. Programs that allow below 1.0 exist but require a larger down payment (30–35%) and a stronger credit profile (700+). Call us if your deal is borderline — we’ll tell you quickly whether it can be structured.
Do I need a business entity (LLC) to get a DSCR loan?
No, but many investors use LLCs for liability protection. We lend to both individuals and entities (LLC, LP, corporation). LLC lending requires a personal guarantee from the managing member in most cases. The program terms are the same whether you borrow personally or through an entity.
Can I get a DSCR loan after a bankruptcy or foreclosure?
In many cases, yes — depending on how long ago the event occurred. Most DSCR programs require a 2–4 year waiting period after bankruptcy discharge or foreclosure completion. Some portfolio programs allow shorter seasoning with compensating factors (strong DSCR, large down payment, credit rebuilding). Tell us what happened and when, and we’ll see what’s available.
Is a DSCR loan a good fit for a first rental property purchase?
Yes — DSCR loans are excellent for first-time rental investors who are self-employed or have complex income, and for W-2 investors who want to keep their rental financing separate from their personal DTI. The main requirement is that the property cash flows at or above your loan payment. If the numbers work on the property, they work for the loan.
How do DSCR rates compare to conventional rates?
DSCR rates are typically 0.5–1.5% higher than conventional conforming rates for equivalent LTV and credit. The premium reflects the reduced documentation and portfolio lending nature of the product. For most investors, this premium is worth it because DSCR eliminates the document burden, allows entity vesting, and has no property count limits — none of which conventional loans offer.
Ready to get started? Apply for a DSCR loan today — free quote, no hard credit pull, close in 14–21 days.