DSCR Loan Guide
What is a DSCR Loan?
A DSCR (Debt Service Coverage Ratio) loan qualifies you based on the property's income, not your personal income. Perfect for investors who are self-employed, have complex tax returns, or want to scale quickly.
How DSCR is Calculated
DSCR = Gross Rent / PITIA
- Principal + Interest payment
- Taxes (property tax)
- Insurance (hazard/homeowners)
- Association dues (HOA)
Typical DSCR Requirements
- 1.25+: Best rates, most options
- 1.20-1.25: Standard qualification
- 1.00-1.20: Some lenders, higher rates
- < 1.00: Most lenders decline (negative cash flow)
DSCR Loan Features
- No W-2 or tax returns required
- Close in LLC or personal name
- Interest rates 0.5-1.5% higher than conventional
- 20-25% down payment typical
- Can use for 1-4 unit or 5+ unit properties
- No limit on number of properties
Common Disqualifiers
- Credit score below 660 (some need 680+)
- DSCR below lender minimum
- Property in poor condition
- Rural or non-warrantable properties
- Recent foreclosure/bankruptcy
Tips to Improve DSCR
- Increase rent (if market supports)
- Lower purchase price (lower payment)
- Put more down (lower loan, lower payment)
- Buy down rate (lower interest = lower payment)
- Shop for lower insurance