A DSCR loan is the workhorse product of the modern buy-and-hold investor. Instead of tax returns and W-2s, it qualifies on the rental income of the property itself. This guide breaks down exactly how DSCR loans work, who they're for, and how to prepare a file that closes fast.
DSCR (Debt Service Coverage Ratio) = monthly rent ÷ PITIA (principal, interest, taxes, insurance, association fees). A ratio of 1.0 means the rent exactly covers the payment; 1.25 means 25% cushion. Lenders use this ratio in place of personal DTI to underwrite investment loans.
Underwriting focuses on the property and borrower credit — not personal income.
DSCR rates typically run 0.75%–2% above owner-occupied conventional rates. Common terms include 30-year fixed, 5/6 ARM, 7/6 ARM, and interest-only. Prepayment penalties (usually 3–5 years, step-down) trade for lower rates.
DSCR loans win on speed, LLC vesting, and unlimited property count. Conventional wins on rate (roughly 0.5–1% cheaper) and no prepay. Most scaling investors use DSCR once they hit the 10-property Fannie Mae limit.
Yes. Many lenders offer sub-1.0 programs (0.75 or "no-ratio") with lower LTV, higher rate, or larger reserves as compensating factors.
Yes. A standard 1004 appraisal (plus 1007 market rent schedule) is required to determine value and market rent for DSCR calculation.
On eligible STR-DSCR programs, yes. Lenders use AirDNA projections or 12 months of trailing PMS revenue depending on the program.
Apply now · Talk to a loan advisor
https://gelitecapital.com/resources/guides/understanding-dscr-loans