DSCR (Investor) Loans

How the DSCR is calculated

DSCR = Monthly gross rental income ÷ Monthly PITIA (principal, interest, taxes, insurance, and association fees).

A DSCR of 1.0 means the rent exactly covers the full payment. Lenders typically look for a minimum of 1.0–1.25. Some allow a DSCR below 1.0 — meaning the property doesn't fully cover its own costs — but with a higher down payment or interest rate. Rent is often based on a market rent analysis even if the property is not yet leased.

Example: a rental bringing in $2,400/month against a full monthly payment (PITIA) of $2,000 has a DSCR of $2,400 ÷ $2,000 = 1.20 — comfortably above most lenders' minimums.

Who qualifies?

DSCR loans are for residential real estate investors, not owner-occupants. There is no traditional income verification — the property's income is the qualification driver. Credit score requirements typically start around 620–680. Down payments commonly range from 20–25%. Lenders usually also require several months of liquid reserves.

Common use cases

Investors use DSCR loans to acquire or refinance:

• Single-family rentals and small multi-unit properties (2–4 units).
• Short-term rentals (vacation / Airbnb) — lender policies vary.
• Portfolio expansion when traditional income docs limit borrowing capacity.

Key considerations

DSCR loans are non-QM products that fall outside the standard qualified-mortgage framework. Rates and fees are typically higher than conventional loans. Because your home is not the collateral (an investment property is), the risk profile is different — but defaulting on an investment mortgage still has serious financial consequences. Compare lenders carefully and consult a tax professional about how investment property debt affects your overall picture.