A good fit if
- You're buying or refinancing a rental property
- Your tax returns understate what you earn
- You own several rentals or want to buy in an LLC
- You've reached the 10-property conventional limit
Probably not if
- You'll live in the property
- You can easily qualify conventionally and want the lowest rate
- The property can't be rented
How a DSCR Loan Works
DSCR stands for debt service coverage ratio. The lender divides the property's monthly rent by its full monthly payment: principal, interest, taxes, insurance, and any HOA dues (PITIA). If the rent covers the payment, the property qualifies, with no W-2s, pay stubs, or tax returns.
Example: rent is $2,600 a month and the full payment is $2,200. $2,600 ÷ $2,200 = 1.18x. The rent covers the payment, so the property qualifies. Your own numbers will be different, so run them in the DSCR calculator.
The lender is qualifying the property, not your paycheck. You'll still need decent credit, cash for the down payment and reserves, and an appraisal that supports the value and the rent. For a deeper walkthrough of the math, read how to calculate DSCR.
What DSCR Do You Need?
- 1.0x or higher: the standard. The rent covers the payment, and you'll have the most lender options and the best pricing, especially at 1.20–1.25x and above. Some lenders require 1.20x for their highest LTVs.
- 0.75x to 0.99x: many lenders allow it, usually with a lower maximum LTV and sometimes a higher score.
- No-ratio (0.0x): no rent test at all, commonly up to about 70–75% LTV on a purchase. Useful in high-cost markets where rent doesn't cover the payment. See no-ratio DSCR loans.
If you're just under 1.0x, an interest-only option or a slightly larger down payment often gets you over the line, which usually prices better than dropping to a lower-ratio program.
DSCR Loan Requirements
Every lender publishes its own matrix, but most DSCR programs land in the same ranges:
- Credit: from about 620 at some lenders, with most programs at 640–680. The best LTVs and pricing usually need 700–720+.
- Down payment: usually 20–25% on a purchase. Up to 85% LTV (15% down) is available at some lenders with 720+ credit and a stronger ratio.
- Reserves: often 2–6 months of the property's payment, more for larger loans, interest-only, or first-time homebuyers.
- Loan size: from about $75,000–$100,000 up to $3 million, with some programs going higher.
The full breakdown, including credit-event waiting periods and property adjustments, is in the DSCR loan requirements guide.
How to Qualify for a DSCR Loan
- Estimate the rent. Use the current lease, or comparable rents for a vacant property or a new purchase.
- Build the full payment. Include taxes, insurance, and HOA, not just principal and interest. In California, estimate taxes on your purchase price, not the seller's bill.
- Check the ratio. Run it in the DSCR calculator and see which tier you land in.
- Line up your cash. Down payment, closing costs, and reserves, in accounts you can document.
- Send me the scenario. I'll match it to the lenders whose guidelines fit, and quote it live.
Documents You'll Need for a DSCR Loan
- A credit authorization and a photo ID
- Two months of bank or investment statements for the down payment, closing costs, and reserves
- The purchase contract, or the current mortgage statement on a refinance
- The lease, if the property is rented
- Insurance quote or declarations page
- LLC documents if you're borrowing in an entity: articles, operating agreement, and EIN letter
No W-2s, pay stubs, tax returns, or employment verification. The appraisal, with a rent schedule, is ordered by the lender.
Properties You Can Finance
- Single-family homes, townhomes, and 2–4 unit properties
- Warrantable and many non-warrantable condos, and condotels with some lenders
- Rural properties and manufactured homes with some lenders, at lower LTVs
- Short-term rentals (see short-term rental loans)
- 5–10 unit properties through small-multifamily programs
- Several properties on one loan (see portfolio and blanket loans)
Borrowing in an LLC
DSCR loans can close in an LLC, and many lenders price them the same as loans in your personal name. You'll sign a personal guarantee and provide your entity documents. Many investors like this because it keeps properties legally separate. DSCR loans also don't count toward the 10-financed-property limit on conventional loans.
DSCR vs. Conventional Investment Loans
| DSCR loan | Conventional investment loan | |
|---|---|---|
| Qualifies on | The property's rent | Your personal income and debts |
| Tax returns | Not required | Usually 2 years |
| Borrow in an LLC | Yes | No |
| Financed property limit | No cap | 10 properties |
| Pricing | Usually somewhat higher | Usually lower |
| Prepayment penalty | Common | None |
If your tax returns show strong income and you own only a few properties, conventional may cost less. Compare them in DSCR vs. conventional.
How Pricing Works
DSCR loans usually cost somewhat more than conventional investment loans because there's no income documentation. Your rate depends on credit score, down payment, DSCR, loan size, and the prepayment penalty you choose. Pricing changes daily, so I quote every scenario live. Read how DSCR rates are priced.
DSCR Loan FAQ
Does a DSCR loan require an appraisal?
Yes. The appraiser also completes a rent schedule that establishes market rent if the property doesn't have a lease.
What if my DSCR is below 1.0?
You still have options. Some programs go down to about 0.75x, and no-ratio programs skip the rent test entirely. Expect a larger down payment and stronger credit requirements.
Can a first-time investor get a DSCR loan?
Usually, yes. Most lenders don't require rental experience. Borrowers who don't currently own any home (first-time homebuyers) face tighter rules at many lenders, often a 700 score, about 70% LTV, a 1.15x DSCR, and extra reserves.
Are there prepayment penalties?
Most DSCR loans have one, often a 3- or 5-year step-down. You can usually choose a shorter penalty, or none, in exchange for a higher rate. Some states limit them.
What credit score do I need for a DSCR loan?
Most lenders start at 640–680, and some go to 620 with a larger down payment. A few programs accept borrowers with no score at a lower LTV.
Can I use a DSCR loan on a home I'll live in?
No. DSCR loans are for investment properties only. For a home you'll live in, look at bank statement or conventional loans.
Business-purpose loans for investment properties in California and other states where permitted. Guidelines shown are typical ranges from published Non-QM lender guidelines as of October 2026 and are not a commitment to lend. Your actual terms depend on credit, property, loan amount, and the lender's current guidelines, and can change without notice.