DSCR Rental Loans

A DSCR loan qualifies on the debt service coverage ratio of the property rather than on your personal income. There are no tax returns, no W2s and no debt to income calculation. The question the lender asks is simple: does the rent cover the payment?

How the DSCR ratio is calculated

DSCR is gross monthly rent divided by the monthly payment, where the payment includes principal, interest, taxes, insurance and any homeowner association dues. That full payment figure is usually abbreviated PITIA.

DSCR = Gross Monthly Rent divided by PITIA

A property renting for $2,400 a month with a $2,000 PITIA payment has a DSCR of 1.20. That means the rent covers the payment with twenty percent to spare. Most programs want to see 1.00 or better, and the best pricing usually starts around 1.25.

DSCR	What it means	Typical treatment
1.25 and above	Rent well exceeds the payment	Best pricing tier
1.00 to 1.24	Rent covers the payment	Standard pricing
0.75 to 0.99	Rent falls short of the payment	Possible at reduced leverage and higher rate
Below 0.75	Significant shortfall	Generally needs more down payment

You can run your own number with the DSCR calculator before you submit anything.

What a DSCR loan does not require

• Tax returns, personal or business
• W2s or pay stubs
• A debt to income ratio calculation
• Employment verification
• A limit on how many financed properties you already own

That last point matters more than investors expect. Conventional financing caps most borrowers at ten financed properties. DSCR programs do not, which is why they become the default product once a portfolio passes a handful of doors.

Typical DSCR loan terms

Term	What we typically place
Loan amount	$100,000 to $25 million
Leverage	Commonly up to 80% loan to value on a purchase
Term	30 year fixed, with interest only options
Property types	Single family, 2 to 4 unit, condo, townhome, and small multifamily
Vesting	LLC vesting is standard and encouraged
Income documentation	None
Time to close	2 to 4 weeks

Prepayment penalties are the term to negotiate

Almost every DSCR loan carries a prepayment penalty, commonly structured over three or five years on a declining scale. This is the single most overlooked term on the sheet. If you intend to sell or refinance the property within that window, the penalty can erase the benefit of the lower rate entirely.

Shorter penalty periods are available and are usually priced with a slightly higher rate. That trade is worth taking whenever your hold horizon is genuinely uncertain. Decide your hold period before you accept the term sheet, not after.

Short term rentals

Some programs will qualify a short term rental using market rent for a long term lease rather than the higher projected nightly revenue. Others will use a documented revenue history. The distinction can move your DSCR substantially, so if the property is a short term rental, raise it at the start rather than after the appraisal is ordered.

Frequently asked questions