DSCR Loans (Investor Cash Flow)
DSCR (Debt Service Coverage Ratio) loans qualify you based on the rental property's income rather than your personal income. If the rent covers the mortgage payment, you can likely qualify—making it easier to scale your investment portfolio.
Program Details
Key Benefits
- Qualify on property income, not personal income
- No limit on number of properties
- Close in LLC for asset protection
- Short-term rentals allowed
- Interest-only payment options
Program Tags
Who It's Best For
- Real estate investors building rental portfolios
- Investors who don't want to show personal income
- Short-term rental (Airbnb/VRBO) property investors
- Borrowers with multiple financed properties
- Self-employed investors with complex tax situations
Advantages
- No personal income verification required
- No limit on number of financed properties
- Short-term rentals (Airbnb) eligible
- LLC/entity vesting available
- Interest-only options for cash flow
- Faster closing than traditional mortgages
- Scale portfolio without W-2 income
- Cash-out refinance available
Considerations
- •Higher rates than primary residence loans (1-2% more)
- •Larger down payments (20-25% typical)
- •Prepayment penalties common (3-5 years)
- •Property must generate sufficient income
- •Investment properties only—not for primary residence
- •Higher reserves required
Eligibility Requirements
- Investment properties (1-4 units)
- Long-term rentals and short-term rentals (Airbnb/VRBO)
- Property DSCR typically 1.0 or higher (rent covers payment)
- U.S. citizens, permanent residents, and some foreign nationals
- Can vest title in LLC or corporation with some lenders
Additional Requirements
- DSCR ratio meeting minimum threshold (typically 0.75-1.25)
- Appraisal with rental income analysis or market rent study
- Property insurance (landlord policy)
- Entity documents if vesting in LLC
- 6-12 months reserves (per property or portfolio)
- No personal income documentation required in many cases
Pro Tips
- DSCR above 1.25 unlocks the best rates—aim for rents at least 25% above your payment
- Short-term rental income typically uses 12-month AirDNA projections or actual history
- Prepayment penalties are common (3-5 years)—factor this into your exit strategy
- Interest-only options can improve cash flow and DSCR ratio
- Buying in an LLC protects personal assets—many DSCR lenders allow this
- Stack DSCR loans with no limit on financed properties (vs. 10 conventional limit)
- Higher down payment (25%+) significantly improves rate and reduces reserves needed
Also Known As
Helpful Resources
DSCR (Debt Service Coverage Ratio) = Monthly Rent ÷ Monthly PITIA (Principal, Interest, Taxes, Insurance, Association dues). A DSCR of 1.0 means rent exactly covers the payment. Most lenders want 1.0-1.25 minimum. Higher DSCR means better rates.
Some lenders offer 'no-ratio' or sub-1.0 DSCR programs for properties where rent doesn't fully cover the payment. Expect higher rates, larger down payments (25-30%), and you'll need to show ability to cover the shortfall.
Yes! For purchases, lenders use either the lesser of appraised market rent or actual lease, or they'll order a rent schedule from the appraiser. For short-term rentals, AirDNA projections or similar market data is used.
No! That's the beauty of DSCR loans. Qualification is based entirely on the property's rental income. You don't need tax returns, W-2s, or pay stubs. Some lenders may verify you have reserves, but income documentation isn't required.
Yes! Many DSCR lenders specialize in short-term rentals. They'll use 12-month projections from services like AirDNA, or your actual rental history if you already own the property. STR programs may have slightly different requirements.
Yes! Many DSCR lenders allow entity vesting. You'll need to provide LLC operating agreement, articles of organization, and EIN. Some charge a small premium for entity vesting, but it provides valuable asset protection.
No! Unlike conventional loans (limited to 10 financed properties), DSCR loans have no portfolio limit. You can finance as many properties as you qualify for, making them ideal for scaling your rental portfolio.
DSCR loans commonly have 3-5 year prepayment penalties: typically 3% in year 1, 2% in year 2, 1% in year 3, none after. You can often pay a higher rate (0.25-0.5%) for no prepayment penalty—important if you might sell or refinance early.
Yes! DSCR cash-out refinances let you pull equity from existing rentals to buy more properties. Typical max LTV is 70-75% for cash-out. This is a powerful strategy to recycle capital and grow your portfolio.
Most programs require 660-680 minimum. Scores of 720+ get the best rates. Some investors offer programs down to 620 with larger down payments and higher DSCR requirements. Credit score significantly impacts your rate.
Typically 6-12 months of PITIA per property. If you own multiple properties, some lenders allow 'global' reserves (total reserves across all properties rather than per-property). Higher reserves may offset other weaknesses in your file.
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Typical Documents
- Last 30 days of pay stubs or income docs
- Last 2 years W-2s or 1099s (as applicable)
- Most recent 2 months of bank statements
- Government-issued ID
- Lease/rent roll or market rent schedule
- Reserves as required by investor
Exact items vary by program and scenario.
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Information provided is for educational purposes only and is not a commitment to lend. All loans subject to underwriting approval. Rates and terms subject to change. Equal Housing Lender. Equal Housing Opportunity.