What is a DSCR Loan? A Complete Guide for Real Estate Investors
A DSCR loan is a mortgage that qualifies based on a rental property's cash flow instead of your personal income. Learn how DSCR loans work, who they're for, and what rates to expect.
Updated 2026-04-20
What is a DSCR loan?
A DSCR loan (Debt Service Coverage Ratio loan) is a type of mortgage used by real estate investors to finance rental properties. Unlike a conventional mortgage, a DSCR loan qualifies the borrower based on the rental cash flow of the property being financed, not the borrower’s personal income, W-2s, or tax returns.
The core idea: if the property generates enough rent to cover the loan’s monthly debt service, the lender considers the loan safe to originate.
How does a DSCR loan work?
The Debt Service Coverage Ratio is a simple formula: monthly rental income divided by monthly principal, interest, taxes, and insurance (PITI). A DSCR of 1.0 means the rent exactly covers the mortgage payment. A DSCR of 1.25 means the rent is 25% higher than the debt service.
Most DSCR lenders look for a ratio of at least 1.0, though many offer better pricing at 1.20 or higher. Some lenders will still fund below 1.0 if the borrower has a strong credit profile or reserves.
DSCR loan requirements
Requirements vary by lender, but typical DSCR loan criteria include: credit score of 680+ (some lenders go to 620), down payment of 20–25%, property held in an LLC, and proof the property will rent at a rate that supports the DSCR minimum.
DSCR loans are asset-based, so you generally will not need to provide personal income documentation, tax returns, or employment verification.
DSCR loan rates and terms
DSCR loan rates typically run 1–2% higher than conventional investment property mortgages because lenders take on more risk without income documentation. Expect 30-year fixed terms, interest-only options for the first 10 years on some programs, and loan amounts up to $2M+ for qualified borrowers.
Rates move with the broader mortgage market. Pricing also depends heavily on the DSCR ratio itself, the property type, and the borrower’s credit score.
Frequently asked questions
Can I get a DSCR loan with an LLC?
Yes. Most DSCR lenders actually prefer to lend to an LLC. Holding rental properties in an LLC is standard for real estate investors and provides liability protection.
What is the minimum DSCR for a loan?
Most lenders require a minimum DSCR of 1.0, meaning rent must at least cover the monthly mortgage payment. Competitive pricing typically starts at 1.20 or higher.
Do DSCR loans require tax returns?
No. One of the primary advantages of a DSCR loan is that it does not require personal tax returns, W-2s, or income documentation. Qualification is based on the property's rental cash flow.
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