A DSCR loan is a non-QM investment property mortgage that qualifies based on the property's rental cash flow instead of the borrower's personal income. DSCR stands for Debt Service Coverage Ratio, calculated as gross monthly rent divided by the property's principal, interest, taxes, insurance, and HOA (PITIA). A DSCR of 1.00 means the rent exactly covers the mortgage payment; 1.25 is the sweet spot for pricing; and many programs will still fund at 0.75 or even no-ratio.
Because DSCR loans are business-purpose loans made to an entity (usually an LLC) and secured by non-owner-occupied investment real estate, they are exempt from Ability-to-Repay rules under the Dodd-Frank Act. That means no tax returns, no employment verification, no debt-to-income calculation, and no limit on the number of financed properties.
Typical DSCR terms: 20% to 25% down, 660+ FICO, 30-year fixed or ARM, prepayment penalty options from 0 to 5 years (buy down for lower rates), reserves of 3-6 months PITIA, and interest-only options that can boost DSCR on tight cash-flow deals. Short-term rental income from AirDNA or 12-month rental history is accepted on most programs.
DSCR loans are ideal for scaling investors, self-employed borrowers, foreign nationals, and anyone whose tax returns don't fully reflect their real income. Learn more about DSCR loan requirements or run your numbers on our calculator.