Specialized mortgage options designed for real estate investors, with qualification based on property income rather than personal earnings.
Debt Service Coverage Ratio (DSCR) loans offer unique advantages for real estate investors looking to expand their portfolios.
Qualification based on property income rather than personal income, ideal for investors with complex tax returns.
No limits on the number of financed properties, allowing serious investors to scale their portfolios efficiently.
Attractive interest rates for investment properties compared to other non-QM loan options for investors.
Properties can be purchased under business entities like LLCs, corporations, or partnerships for asset protection.
Streamlined approval process with less documentation than traditional loans, enabling faster closing times.
Various loan term options including 30-year fixed rates, ARMs, and interest-only periods to match investment strategies.
Debt Service Coverage Ratio loans have specific qualification requirements focused on the investment property's income potential rather than the borrower's personal income.
For DSCR loans, rental income can be determined in several ways. For existing properties, lenders may use the current lease agreement or actual rental income from previous years. For new investment properties or refinances without current tenants, lenders often use a market rent analysis or appraisal rent schedule to establish potential rental income.
The DSCR ratio directly affects loan terms and eligibility. A DSCR of exactly 1.0 means the property's income exactly covers the debt payments. DSCR ratios below 1.0 (known as "negative DSCR") may still be eligible with certain lenders but typically require larger down payments and result in higher interest rates. DSCR ratios above 1.25 often qualify for the best available rates and terms.
Securing a DSCR loan involves a streamlined process focused on property performance rather than borrower income.
Begin with a discussion about your investment strategy, property details, and financial goals to determine if a DSCR loan is right for your situation.
We'll analyze potential rental income versus expenses to calculate the projected DSCR and determine the loan amount you may qualify for.
Complete a loan application and provide required documents, including property details, rent schedules, and personal financial information.
A professional appraiser will evaluate the property to determine its market value and rental income potential using comparable rentals in the area.
The loan undergoes underwriting focused on the property's income potential, DSCR calculation, and borrower's credit profile rather than income verification.
Once approved, you'll sign final loan documents and close on your investment property, typically with a faster timeline than traditional financing.
See how DSCR loans compare to other financing options for investment properties.
| Feature | DSCR Loan | Conventional Investment Loan | Hard Money Loan |
|---|---|---|---|
| Income Verification | None (property income only) | Full documentation required | Minimal or none |
| Interest Rates | Moderate (5-7%) | Lowest (4-6%) | Highest (8-12%+) |
| Down Payment | 20-25% typically | 15-25% | 30-40% typical |
| Property Limit | No limit | Typically 10 financed properties | No limit |
| Loan Term | 30-year options available | 15 or 30-year fixed | 1-5 years typical |
| Closing Timeline | 2-4 weeks | 30-45 days | 1-2 weeks |
DSCR loans provide a valuable middle ground between conventional financing and hard money loans for real estate investors. They offer longer terms than hard money without the income verification requirements of conventional loans, making them ideal for investors with multiple properties or complex tax situations who want to scale their portfolio based on property performance rather than personal income.
Hear from real estate investors who have successfully utilized DSCR loans to grow their investment portfolios.
As someone with multiple investment properties, DSCR loans have been a game-changer. I no longer have to worry about debt-to-income ratios or providing years of tax returns. My properties qualify based on their own merits, allowing me to scale much faster.
The DSCR loan process was remarkably straightforward compared to conventional financing. I was able to purchase a fourplex under my LLC without the hassle of personal income verification, and the closing happened in half the time of my previous investment property purchases.
As a self-employed investor, my tax returns never show my true income. DSCR loans focus on what matters - the cash flow of the property. This has allowed me to acquire three additional rental properties this year alone, something that would have been impossible with traditional financing.
Get answers to common questions about DSCR loans, eligibility, and the application process.
A DSCR (Debt Service Coverage Ratio) loan is a type of mortgage specifically designed for investment properties where qualification is based primarily on the property's income rather than the borrower's personal income. The debt service coverage ratio compares the property's rental income to its debt obligations, and lenders typically look for a ratio of 1.0 or higher, meaning the property generates at least enough income to cover its mortgage payment and associated costs.
The DSCR is calculated by dividing the property's monthly rental income by its monthly debt service (the total monthly mortgage payment including principal, interest, taxes, insurance, and HOA fees if applicable). For example, if a property generates $2,000 in monthly rent and has a total monthly payment of $1,600, the DSCR would be 1.25 ($2,000 ÷ $1,600 = 1.25), indicating the property produces 25% more income than needed to cover its mortgage expenses.
Most DSCR lenders require a minimum credit score of 640-680, though requirements can vary. Borrowers with higher credit scores typically qualify for better interest rates and terms. Some lenders may consider scores as low as 620 with compensating factors like a higher down payment or stronger DSCR ratio, while others may require 700+ for their best programs.
Yes, many DSCR loan programs now accommodate short-term rentals like Airbnb and VRBO properties. For these properties, lenders may use different methods to calculate income, such as looking at historical short-term rental performance, analyzing comparable short-term rentals in the area, or applying a discount to projected short-term rental income to account for potential vacancy and seasonality.
Yes, DSCR loans are available to first-time investors, though some lenders may have additional requirements for borrowers new to real estate investing. First-time investors might need to provide a larger down payment (25-30% instead of 20%), demonstrate additional cash reserves, or meet a higher DSCR threshold. The property's potential performance remains the primary qualification factor regardless of investor experience.
Most residential investment properties qualify for DSCR financing, including single-family homes, 2-4 unit properties, condos, townhomes, and PUDs (Planned Unit Developments). Some DSCR loan programs extend to multi-family properties with 5+ units and mixed-use properties with a predominant residential component. The critical factor is that the property must be non-owner occupied and generate rental income.
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For information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. E Mortgage Capital, Inc. d/b/a E Mortgage Capital, NMLS# 1416824. Equal Housing Lender (NMLS consumer access: https://www.nmlsconsumeraccess.org/_)
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