A DSCR loan (Debt Service Coverage Ratio loan) is a business-purpose mortgage for investment properties. Instead of qualifying on W-2s or personal tax returns, lenders look at whether the property’s rental income can cover the mortgage payment.
How DSCR Loans Work
DSCR is typically calculated as rental income divided by the full housing payment (principal, interest, taxes, insurance, and HOA when applicable). A ratio at or above the program minimum shows the property can support the debt.
Who They’re For
These loans are designed for real estate investors buying or refinancing rentals — including single-family, multifamily, and short-term rental strategies — where personal income docs are a poor fit.
Key Requirements
Exact guidelines vary by program, but investors commonly need a qualifying DSCR, sufficient credit and reserves, and a property that meets investor lending standards. Loan amounts and LTVs depend on the specific DSCR matrix.