How It Works
DSCR stands for Debt Service Coverage Ratio. A DSCR loan qualifies based on the rental income the property generates compared to its monthly mortgage payment, not the borrower's personal income or employment. The DSCR is calculated by dividing the property's gross monthly rent by the total monthly mortgage payment including principal, interest, taxes, insurance, and HOA. A DSCR of 1.00 means the property exactly covers its housing payment; a DSCR of 1.25 means the rent is 25% higher than the payment.
Most DSCR lenders require a minimum ratio of 1.00 to 1.25, though some programs go down to 0.75 for strong borrowers willing to accept higher pricing. Because qualifying is based on the property itself, DSCR loans are ideal for full-time real estate investors, LLC-titled holdings, BRRRR strategies, and short-term rental operators. There's no DTI calculation, no employment verification, and no tax returns required.
DSCR loans typically allow you to close in an LLC, finance up to 10+ properties, and use estimated rent (market rent surveys or short-term rental projections) for properties not yet leased. Expect down payments of 20–25%, interest rates 1%–2% above primary-residence pricing, and loan amounts up to several million per property. It's the workhorse loan product for serious residential real estate investors.
Who Is This For?
- Full-time real estate investors building rental portfolios
- Buyers wanting to close in an LLC for asset protection
- Short-term rental operators (Airbnb, VRBO) qualifying on projected income
- BRRRR investors refinancing after value-add renovations
- Investors who own more than 10 financed properties (Fannie/Freddie limit)
Pros & Cons
Frequently Asked Questions
What DSCR ratio do I need to qualify?+
Most DSCR lenders require a minimum ratio of 1.00 to 1.25. Some specialty programs go as low as 0.75 for borrowers with strong credit, large reserves, and meaningful down payments — though pricing is higher.
Can I close a DSCR loan in an LLC?+
Yes. Most DSCR programs are specifically designed to close in an LLC for asset protection. You typically need to be a guarantor personally, but the loan and property title are in the entity name.
Are short-term rentals (Airbnb) eligible?+
Many DSCR lenders accept short-term rental properties and will use projected income from market rent surveys or actual booking history. Programs vary — some require 12 months of operating history, others accept market projections for new STRs.
How many properties can I finance with DSCR?+
Unlimited. Unlike conventional loans (which cap at 10 financed properties per borrower under Fannie/Freddie guidelines), DSCR has no portfolio limit. This makes it the workhorse loan for full-time real estate investors.