DSCR Loans Made Simple
Invest smarter and grow faster. Qualify based on your property's cash flow, not your personal income. If the property cash flows, you may qualify.
What Is a DSCR Loan?
A Debt Service Coverage Ratio (DSCR) loan is a type of non-qualified mortgage (non-QM) designed specifically for real estate investors. Unlike traditional loans that require personal tax returns or employment verification, DSCR loans focus on the property itself.
The question is simple: Does the property’s rental income cover its debt?
How DSCR Is Calculated
The Debt Service Coverage Ratio (DSCR) compares a property’s Net Operating Income (NOI) to its debt service (monthly mortgage).
Formula:
DSCR = Net Operating Income ÷ Total Debt Service
Net Operating Income (NOI): Rental income minus expenses like property taxes, insurance, HOA fees, and maintenance.
Debt Service: Monthly principal and interest payments.
What It Means:
- DSCR greater than 1.0 → Income exceeds debt → Positive cash flow.
- DSCR equal to 1.0 → Break-even → Income just covers debt.
- DSCR less than 1.0 → Negative → Income doesn’t cover debt.
Lenders usually look for a DSCR of 1.25 or higher, signaling strong cash flow.
> Key Benefits of DSCR Loans
Why do investors love DSCR loans?
- Focus on the Property, Not You – Approval is based on property performance, not your W-2s or tax returns.
- No Personal Income Verification – Perfect for entrepreneurs and self-employed investors.
- For Investment Properties Only – Use for single-family, multi-family, or short-term rentals.
- Speed & Simplicity – Faster approvals, less paperwork.
- Flexibility – Eligible across multiple property types, from Airbnbs to duplexes.
- Portfolio Building – No cap on how many properties you can finance.
> Typical Borrower & Property Qualifications
While DSCR loans don’t use personal income, lenders do review other criteria to protect the investment.
- Credit Score: Usually 620–680+ (higher = better terms).
- Down Payment: Typically 20–30%.
- Cash Reserves: Enough to cover 3–12 months of PITI (Principal, Interest, Taxes, Insurance).
- Property Appraisal & Rental Analysis: Confirms value and projected income.
- Investor Experience: Some lenders prefer prior landlord experience.
- Owner Requirement: Typically must already own a primary residence.
- No Limit on Property Count: Unlike conventional financing, you can keep scaling.
>> Closing Options: Personal vs. LLC vs. Trust
When closing on a DSCR loan, you can hold title in your personal name, an LLC, or a trust: each has pros and cons.
Personal Name
Pros: Simple, more lender options.
Cons: No liability protection; scaling limited by DTI ratios.
LLC
Pros: Liability shield, professionalism, financial separation, partnership-friendly.
Cons: Personal guarantees still common; setup/maintenance costs.
Trust
Pros: Privacy, estate planning advantages, potential probate avoidance.
Cons: More complex; fewer lenders allow direct trust borrowing.
Tip: Many investors choose an LLC for the balance of liability protection and flexibility.
Upcoming DSCR Classes
Learn how to use DSCR loans to grow your portfolio. Join a session to understand underwriting, ownership options, and case studies for both short-term and long-term rentals.
Class Schedule
DSCR 101: With the DSCR Profit Prophet
Join us for DSCR 101 with the DSCR Profit Prophet to learn about the DSCR loan and how to make it work for REI success!
October 9, 2025
7:00 PM CT
Virtual (Zoom)
DSCR 101: With the DSCR Profit Prophet
Join us for DSCR 101 with the DSCR Profit Prophet to learn about the DSCR loan and how to make it work for REI success!
October 23, 2025
7:00 PM CT
Virtual (Zoom)
> Ready to Explore DSCR Loans?
Whether you’re a new investor or scaling your portfolio, DSCR loans can open doors conventional financing won’t. Let’s talk about how you can leverage them for your next deal.
