DSCR Loans Explained: How to Qualify Based on Property Income, Not Your W-2

DSCR (Debt Service Coverage Ratio) loans qualify you based on the property’s rental income — not your personal income. If the property makes enough money to cover the mortgage, you qualify.

How DSCR Works

DSCR = Monthly Rental Income / Monthly Mortgage Payment (PITIA)

• DSCR of 1.0 = rental income exactly covers the payment
• DSCR of 1.25 = rental income is 25% more than the payment (this is the typical minimum)
• DSCR below 1.0 = the property doesn’t cover its own costs

Why Investors Love DSCR Loans

• No tax returns required — Your W-2 or personal income doesn’t matter
• No DTI limits — Already have 10 mortgages? Doesn’t matter if the property cash flows
• Close in LLCs — Most DSCR lenders let you close in your business entity
• Scale faster — No conventional loan limit (Fannie Mae caps you at 10)

Typical Terms

• Down payment: 20-25%
• Interest rates: 1-2% above conventional (7-9% currently)
• Minimum DSCR: 1.0-1.25 (varies by lender)
• Minimum credit score: 660-700
• Property types: SFR, 2-4 units, small multifamily

When DSCR Makes Sense

• You’re self-employed or have hard-to-document income
• You already have 4+ conventional mortgages
• You’re buying in an LLC
• The property cash flows well (DSCR 1.2+)

When It Doesn’t

• You can qualify for conventional (lower rates, better terms)
• The property barely breaks even (DSCR under 1.0)
• You need a low down payment option (DSCR requires 20%+)

Analyze whether a property qualifies for DSCR financing in DealBase’s deal analyzer. Try it for $1.