DSCR stands for Debt Service Coverage Ratio — the ratio of a rental property's monthly gross income to its total monthly debt obligation (principal, interest, taxes, insurance, and HOA — known as PITIA).
The formula: Monthly Rent ÷ Monthly PITIA = DSCR. A DSCR of 1.0 or higher means the property pays for itself. Most programs require a minimum of 1.0, with stronger pricing as your ratio climbs above 1.25.
What separates DSCR from every other mortgage product is what it doesn't require: no W-2s, no personal tax returns, no employer verification, and no debt-to-income ratio calculation. The underwriter qualifies the deal — not you personally.
Example: Property rents for $2,600/month. Total PITIA is $2,200/month. DSCR = 2,600 ÷ 2,200 = 1.18x — above the 1.0 threshold. Loan qualifies. No W-2s needed.
DSCR loans exist because the conventional system fails a huge segment of creditworthy borrowers:
DSCR loans close in LLCs, S-Corps, and trusts at the same rate and terms as personal-name loans. This is one of the primary reasons portfolio investors use DSCR financing — it allows proper legal separation between assets without a rate penalty.
DSCR rates typically run 0.5–1.5% above conventional investment property rates, reflecting the reduced documentation. Your exact rate depends on FICO, LTV, DSCR ratio, and loan size. See the full rate table →
Yes. A standard appraisal is required. The appraiser also completes a rent schedule (Form 1007) establishing market rent for DSCR qualification if you don't have an existing lease.
A no-ratio DSCR product may be available, which skips the rent vs. payment test entirely. It's common in high-cost markets like California and NYC. Higher down payment and FICO requirements apply.
Most DSCR loans include a step-down prepayment penalty (typically 3 or 5 years). You can often buy out of the PPP at a slightly higher rate. Always know your exit strategy before locking.
No. DSCR loans are for investment properties only. The property must be purchased as a rental and cannot be owner-occupied.
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