What Is a DSCR Loan? Debt Service Coverage Ratio

A DSCR loan is based on the income produced by the property, not your income.It means the rent will cover the mortgage.

Basic Requirements

1. There is a DSCR Ratio Lenders Want

• 1.0 or higher. This means is simply covers your mortgage.

• 1.25 is even better. This means the rent is 25% over the mortgage.

Example:

• Rent = $2,000

• Mortgage = $1,500

• DSCR = 1.33

2. Your Credit Score

It is usually accepted with a 620–680 minimum

3. Your Down Payment

20% to 25% of the property being purchased

4. Property Type

• Single-family with a room or a basement to rent

• Duplex

• Triplex

• Fourplex

Why Investors Like DSCR Loans

• It does not require your W-2 income

• Easier to scale, meaning you can buy more properties.

• Faster approval process with lender

What are The Pros and Cons

Pros

• Flexible income rules

• Good for investors

• Can buy more properties

Cons

• Higher interest rates usually buy 1 or 2%

• Need a larger down payment

Who Should Use DSCR Loans?

• Self-employed investors

• Retirees

• People wanting to build rental income

Final Thoughts

DSCR loans are powerful tools for investors. They let the property qualify for the loan—not you.

FAQ

Can beginners use DSCR loans?
Yes, you just have to meet the basic requirements.

Can I live in the property?
No, you cannot live in the home. DSCR loans are for investment properties.

👉 Next Step: Learn how to find the best DSCR lenders to get started.