What is a DSCR loan?
DSCR stands for debt service coverage ratio. It's an investment property loan where the lender compares the property's rental income to its monthly housing payment. If the rent covers the payment, the property can qualify, even if your tax returns show heavy write-offs or your income is hard to document.
How DSCR is calculated
DSCR = Monthly rent ÷ Monthly PITIA (principal, interest, taxes, insurance and HOA dues)
| Monthly rent | Monthly PITIA | DSCR |
|---|---|---|
| $3,000 | $2,500 | 1.20 |
| $2,500 | $2,500 | 1.00 |
| $2,200 | $2,500 | 0.88 |
Many programs look for a DSCR of 1.0 or higher. Some allow lower ratios with adjusted terms.
DSCR loan highlights
- No personal income verification: no W-2s, pay stubs or tax returns.
- Close in an LLC: keep your investments in a business entity.
- Long-term or short-term rentals: some programs accept vacation rental income.
- Purchase or cash-out refinance: use your equity to buy the next property.
- Down payment: commonly 20% to 25%, depending on credit, property type and DSCR.
- Portfolio friendly: scale beyond the limits that apply to conventional investment loans.
Who is a DSCR loan best for?
Self-employed investors, business owners with large deductions, investors who own several properties, and buyers of Orlando-area vacation rentals who want to qualify on the property instead of their personal income.
How I structure DSCR loans
The rent estimate, the insurance quote and the HOA dues can decide whether a DSCR deal works. I dig into those numbers before you go under contract, so we know the ratio holds up and you aren't surprised by the appraisal.
DSCR loan FAQs
What is a DSCR loan?
An investment property mortgage that qualifies you based on the property's rental income compared to its monthly payment, instead of your personal income, W-2s or tax returns.
How is DSCR calculated?
Monthly rent divided by the monthly PITIA payment. For example, $3,000 rent ÷ $2,500 payment = 1.20 DSCR.
How much down payment do I need for a DSCR loan?
Commonly about 20% to 25% for purchases, depending on credit score, property type and DSCR ratio. Cash-out refinances are also available on many programs.
Can I use Airbnb or short-term rental income for a DSCR loan?
Some programs allow short-term rental income, based on market data or the property's rental history. That can work well for vacation rentals in the Orlando and Kissimmee area. Guidelines vary by investor.
Can I close a DSCR loan in an LLC?
Yes. DSCR loans are business-purpose loans, and most programs allow closing in an LLC or other entity, usually with a personal guarantee.
DSCR loans are business-purpose loans for non-owner-occupied investment properties only. Terms, ratios and down payment requirements vary by investor and may include prepayment penalties. All loans are subject to credit approval and underwriting. This is not a commitment to lend.