Quick answer
A DSCR (debt service coverage ratio) loan is a non-QM investor mortgage that qualifies a rental property by dividing its rent by the full monthly payment (principal, interest, taxes, insurance and any HOA). Many programs look for a ratio of 1.0 or higher; some allow less with a larger down payment. Expect 20% to 25% down and pricing above a conventional investor loan. For investment properties only.
What is a DSCR loan?
DSCR stands for debt service coverage ratio. Instead of checking your tax returns and debt-to-income ratio, the lender asks one question: does the rent cover the payment? That makes DSCR loans popular with self-employed investors and anyone who owns several properties, where personal income math gets complicated.
Example: $2,500 rent ÷ $2,200 full monthly payment = a DSCR of about 1.14. The rent covers the payment with about 14% to spare.
DSCR calculator
This uses an example rate. Your actual rate depends on the property, credit and ratio.
Get a DSCR Loan Quote →Example rate only, 30-year fixed principal and interest. Actual rates, ratio minimums and terms vary by lender. Not a loan offer; all loans subject to credit approval and underwriting.
What ratio do you need?
- 1.25 or higher: usually the best pricing.
- 1.0 to 1.24: the rent covers the payment; many programs accept this.
- Below 1.0: some lenders offer “no-ratio” or low-ratio options, typically with a larger down payment and higher rate.
Rent usually comes from an existing lease or the appraiser's market rent estimate. Short-term rental income may be allowed by some programs with booking history.
Typical requirements
| Item | What lenders typically look for |
|---|---|
| Property use | Investment only (not your home) |
| Down payment / equity | Often 20%–25% |
| Reserves | Several months of payments in the bank |
| Ownership | Personal name or an LLC, depending on program |
| Personal income | Not used to qualify |
Typical ranges, not a quote. Terms vary by lender, property type and loan size.
Who it fits
- Investors buying or refinancing single-family rentals, 2–4 units and some condos.
- Self-employed investors whose tax returns show heavy depreciation and write-offs.
- Owners scaling past the number of financed properties conventional loans allow.
Already own rentals with equity? Compare a DSCR loan vs. a HELOC before you refinance.
FAQ
What is a good DSCR for a loan?
Many programs look for 1.0 or higher, meaning the rent covers the full payment. Ratios of 1.25 or more usually get the best pricing. Some lenders allow below 1.0 with a larger down payment.
Do DSCR loans require tax returns?
No. DSCR loans qualify the property on its rent. Your credit, assets and reserves are still reviewed.
How much down for a DSCR loan?
Typically 20% to 25%, depending on the ratio, credit score and property type.
Can I use a DSCR loan for my primary home?
No. DSCR loans are for investment properties only.
Part of the self-employed and non-QM mortgage guide: bank statement, P&L, 1099, asset depletion, DSCR, WVOE, ITIN and foreign national loans.
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Keep reading
DSCR Loan vs. HELOC
Which works better for investors.
Investment Property HELOC
Tap rental equity, keep the first mortgage.
DSCR Loan Requirements
Ratios, down payment and reserves.