What is a DSCR loan?
Last updated 2026-07-17
A DSCR loan is an investment-property mortgage underwritten on the property's rental income instead of the borrower's personal income. DSCR stands for debt service coverage ratio: monthly rent divided by the monthly payment (principal, interest, taxes, insurance, and association dues). A ratio of 1.0 means the rent exactly covers the payment.
How the ratio works
Take the property's monthly rent and divide it by the full monthly payment, known as PITIA (principal, interest, taxes, insurance, association dues). Rent of $2,500 against a $2,000 payment is a DSCR of 1.25, which is the level many programs price best. Most lenders lend down to 1.0, and some go below with compensating factors like a larger down payment.
Because qualification rides on the property, DSCR loans skip tax returns, W-2s, and debt-to-income math. Self-employed investors and owners with many properties use them for exactly that reason. Loans close in an LLC, and there is typically no limit on how many properties an investor can finance.
Where DSCR fits in creative deals
DSCR programs are business-purpose loans, so they combine naturally with seller financing. A common hybrid: a DSCR first mortgage covers most of the price, and the seller carries a second for part of the rest, cutting the buyer's cash to close while the seller still converts most of their equity. Which programs allow a seller-carried second, and to what combined loan-to-value, varies by lender, which is exactly the kind of question a licensed desk answers before you write the offer.
Frequently asked questions
What DSCR do lenders require?
Most programs prefer 1.25 or higher for best pricing, lend down to 1.0, and a few go below 1.0 with larger down payments. Requirements vary by lender and program.
Do DSCR loans require income verification?
No personal income verification. The property's rent does the qualifying; lenders verify the rent with a lease or a market-rent appraisal.
Can I get a DSCR loan in an LLC?
Yes. Closing in an LLC is standard on DSCR loans, and most investors do exactly that.
Can a seller-carried second sit behind a DSCR first?
Some programs allow it, subject to combined loan-to-value caps; others prohibit secondary financing. It is lender-specific, so confirm the structure before contracting.
Educational content, not legal, tax, or investment advice, and not an offer to lend. Talk to a licensed professional about your situation; the Deal Desk is a good place to start.