Purchase Loans
DSCR loans are the default financing tool for serious real estate investors. Instead of qualifying based on your personal income, tax returns, or employment history, a DSCR loan qualifies based on whether the property itself produces enough rental income to cover the mortgage payment. The Debt Service Coverage Ratio (DSCR) is the math: gross monthly rent divided by total monthly housing expense (principal, interest, taxes, insurance, HOA). A 1.0 DSCR means rent exactly covers the payment; most lenders target 1.0 or higher, with some programs accepting as low as 0.75 at the cost of a rate premium. Because DSCR loans ignore personal income, they solve three problems conventional investment financing can’t: self-employed investors whose tax returns understate income, investors already maxed out on conventional’s 10-property limit, and investors closing in LLCs for asset protection. You trade a modest rate premium for underwriting flexibility — typically 0.5–1.0% over conventional investment rates.
Qualification is based on the property’s debt service coverage ratio — gross monthly rent divided by total monthly housing expense (principal, interest, taxes, insurance, plus HOA if applicable).
Personal tax returns and employment verification are typically not required, which streamlines the process for self-employed investors and anyone with complex income.
DSCR loans are available for single-family rentals, condos, townhomes, 2–4 unit properties, and in many cases short-term rental properties (Airbnb/VRBO).
Down payments typically range from 20% to 25% for purchase and investment refinance scenarios. Rate-and-term refinances may allow up to 80% LTV.
Loans commonly close in LLCs or other business entities, which most conventional investment-property programs don’t permit.
There's no cap on the number of DSCR-financed properties you can own, unlike conventional investment lending (which generally limits borrowers to 10 financed properties).
Business owner with strong cash flow but low taxable income. Conventional investment financing rejects the file; DSCR ignores personal income entirely and qualifies off the property’s rent.
Fannie and Freddie cap borrowers at 10 financed properties. DSCR has no property-count limit — once you’re at the cap, DSCR becomes your only scalable financing option.
Many DSCR programs accept short-term rental income via AirDNA projections or 12 months of Airbnb statements, letting you qualify without personal income documentation.
Buy, rehab, rent, refinance, repeat. DSCR cash-out refinance pulls equity after rehab without requiring personal income documentation — the key mechanic that makes BRRRR capital-efficient.
Most conventional investment loans won’t close in an LLC. DSCR programs explicitly allow entity vesting, which is why experienced investors default to DSCR even when they could qualify conventionally.
Down payment $87,500, loan $262,500 at a 7.5% DSCR rate. Monthly principal and interest about $1,835. Taxes and insurance add ~$400 → total monthly housing expense $2,235. If the property rents for $2,300/month, DSCR = 2,300 ÷ 2,235 = 1.03. Qualifies.
Down $125k, loan $375,000 at 7.875%. Monthly PITI around $3,250. AirDNA projects $4,800/month in gross rent. DSCR = 4,800 ÷ 3,250 = 1.48. Comfortably qualifies; most short-term rental DSCR programs want 1.0+ with 12 months of rental history for stabilized properties.
After rehab, property appraises at $400k. New loan at 75% LTV = $300,000. Monthly PITI about $2,450 at 7.75%. Property rents for $2,800. DSCR = 2,800 ÷ 2,450 = 1.14. Qualifies, and refinance proceeds recycle $60k+ of initial acquisition and rehab capital into the next deal.
Example figures use illustrative rates and are for educational purposes only. Actual rates, terms, and costs depend on credit profile, market conditions, and property specifics.
Conventional is cheaper (0.5–1% lower rate) but requires personal income documentation, W-2 or two years tax returns, and caps you at 10 financed properties. DSCR costs a bit more but scales without that friction.
Bank statement loans qualify off deposit history for self-employed borrowers on primary residences; DSCR qualifies off property cash flow for investment. They solve similar documentation problems for different property types.
Hard money offers the fastest closings (as short as 7 days) and flexibility for distressed properties, but rates run 9–12% and terms are short (12–24 months). DSCR is cheaper long-term financing once a property is stabilized.
Portfolio loans cover scenarios DSCR won't — multiple properties cross-collateralized, unusual collateral, complex entity structures. DSCR is simpler, faster, and better-priced for straightforward single-property deals.
Explore the programs dscr loans — qualify on rental income, not w-2s are most often compared against, plus the Purchase Loans hub for the full lineup and today's mortgage rates for current pricing context.
The Debt Service Coverage Ratio is calculated by dividing the property’s gross monthly rental income by its total monthly debt obligation (principal, interest, taxes, insurance, and any HOA dues). A DSCR of 1.0 means the rent exactly covers the payment. Most lenders look for a ratio of 1.0 or higher.
In most cases, no. DSCR loans are underwritten based on the property’s income potential, not your personal income. This makes them a strong fit for self-employed investors, business owners, and anyone with non-traditional income.
Many DSCR programs do allow short-term rentals. Income projections for short-term rentals are typically based on market data or a third-party rent analysis rather than a traditional lease. Program availability can vary, so it’s worth discussing your specific scenario.
Yes. DSCR loans commonly allow vesting in an LLC or other business entity, which many investors prefer for liability protection and portfolio management. This is one of the key advantages over conventional investment property financing.
Typically 0.5–1.0% higher, depending on DSCR ratio, credit score, loan size, and program. A DSCR of 1.25+ with 720+ credit prices closest to conventional; DSCR under 1.0 adds meaningful premium.
Most do. Common structures are 3- or 5-year prepayment penalties, either step-down (5-4-3-2-1) or flat. Some programs offer no-prepay options at a 0.25–0.5% rate premium.
Most mainstream programs require 1.0 or higher. Specialty programs accept as low as 0.75 with a rate premium and tighter credit/reserve requirements. Under 0.75 is generally not financeable via DSCR.
Yes — this is one of the most common DSCR use cases. After stabilizing the property with tenant in place (or market rent analysis for short-term), you can typically refinance up to 75–80% of the new appraised value and recycle capital into the next acquisition.
No universal cap like conventional’s 10-property limit. Some lenders have internal portfolio limits, but across multiple DSCR lenders you can scale indefinitely.
DSCR programs qualify 100% off the subject property’s rent — they don’t consider your other rental portfolio’s income. That’s actually an advantage: you don’t need schedule E history for the subject property, and you can qualify on market rent analysis for new purchases.
Before you make an offer, verify the deal cash-flows using the DSCR calculator — enter rental income, expenses, and debt service to see whether the property qualifies for a DSCR-based loan. Then model the full payment in the mortgage calculator to factor taxes and insurance into your investor cash-flow analysis.