A DSCR loan (Debt Service Coverage Ratio loan) is a type of mortgage for real estate investors that bases your qualification on the property’s income rather than your personal income. Essentially, if the rent the property generates is enough to cover the mortgage (i.e., the debt service), you can qualify. This means you don’t need to provide pay stubs, W-2s, or tax returns to prove income – a huge advantage for investors with complex finances. The lender will look at the projected or actual rent and compare it to the monthly payment on the loan. (For instance, if the property rents for $2,000/mo and the mortgage payment (including taxes/insurance) is $1,600/mo, the DSCR = 1.25, indicating solid positive cash flow).

DSCR is calculated by dividing the property’s net operating income (rent minus expenses) by the annual debt (mortgage payments). In simple terms, DSCR = Rent Income / Mortgage Payment. For example, a property with $12,000/year in rent and $10,000/year in mortgage payments has a DSCR of 1.2 (since 12,000 ÷ 10,000 = 1.2). A DSCR of 1.0 is breakeven (rent equals the payment), above 1.0 means the property’s income exceeds the debt (positive cash flow), and below 1.0 means the property doesn’t fully cover its debt (negative cash flow). Many lenders require around 1.1 to 1.25 DSCR, but as mentioned, some programs allow lower with conditions.

No – that’s the beauty of DSCR loans! You do not need to show personal income or employment for qualification. The loan is made to you (or your LLC) primarily on the basis of the property’s income potential. As long as the property’s cash flow meets the DSCR threshold and you have the credit score and down payment, you can qualify regardless of your personal debt-to-income ratio. (Of course, you still need to show you have the down payment and some reserves, and your credit history matters, but your personal job income isn’t part of the approval formula.)

Generally yes, DSCR loans usually come with slightly higher interest rates (and sometimes additional fees) compared to conventional homeowner loans. This is because lenders take on more risk by not verifying personal income. However, investors often find the trade-off worth it for the easier approval and flexibility. The exact rate depends on your scenario (credit, DSCR, etc.). We’ll gladly provide a rate quote so you can see the pricing. (Pro tip: If you have excellent credit and a strong DSCR property, rates can be quite competitive even for DSCR loans.)

No. DSCR loans are for investment properties only – those that generate rental income. They are sometimes called “Investor Cash Flow Loans” for that reason. If you need financing for a primary home, we offer other loan programs, but it won’t fall under DSCR.

It varies by lender, but expect similar closing costs to other mortgages (appraisal, title, etc.), and possibly a lender origination fee. Some DSCR loans may have a prepayment penalty (especially if it’s an investor loan – often a few years of penalty if you pay it off early). We’ll disclose all fees upfront.