A DSCR loan (Debt Service Coverage Ratio) is designed for real estate investors. Instead of qualifying on your personal income, the loan qualifies on whether the property's rental income covers its own debt payment.
How the ratio works: DSCR compares the property's monthly rental income to its monthly debt obligation - principal, interest, taxes, insurance and HOA. A ratio of 1.0 means rent exactly covers the payment. Above 1.0 means the property generates surplus. Below 1.0 means it does not cover itself. Most lenders look for 1.0 to 1.25 or higher, though some programs allow lower ratios with compensating factors. Requirements vary by lender, which is exactly where comparing across 30+ lenders matters.
What is typically required: a down payment generally starting around 20 to 25 percent, credit score requirements that vary by program, and no personal income documentation - no W-2s, no tax returns, no employment verification. We finance 1 to 8 unit properties, which matters: most lenders stop at 4 units and send anything larger to commercial underwriting. That means single-family rentals, duplexes through fourplexes, and 5 to 8 unit buildings all qualify on lease income under one process. Condos and short-term rentals are often eligible too, and most programs allow closing in an LLC. Specific terms differ between lenders, so these are not universal rules.
When a DSCR loan is the right tool: it fits well if you are an investor whose tax returns understate real cash flow, you are scaling a portfolio past conventional limits, you want to hold property in an LLC, or you need to close quickly. Look elsewhere if the property does not cash flow, you have limited reserves, or a conventional investment loan would price better - which it sometimes does. DSCR programs vary more between lenders than almost any other product, so one application and one credit pull across 30+ lenders shows you where your specific deal prices best.
A worked example, so the math is not abstract. Say a 6 unit building at $750,000, renting at $1,250 per unit. Gross rent is $7,500 a month. With 25 percent down, the loan is $562,500. Add up principal, interest, taxes, insurance and any HOA - call that $5,800 a month. Divide $7,500 by $5,800 and the DSCR is about 1.29. That clears most lender thresholds comfortably. Drop the rents to $1,050 per unit and the same building produces $6,300 against $5,800, a DSCR of 1.09 - still workable with some lenders, declined by others. These are illustrative numbers, not a quote, but they show why the same deal gets different answers from different lenders.
How we help: send me the property and the rents and I will run the ratio before you apply. If the numbers do not work, I will tell you that and explain what would need to change - a larger down payment, a different property, or a conventional investment loan instead. If they do work, one application and one credit pull goes to 30+ lenders and you see which one prices your specific deal best. No cost to find out.
What to have ready: the address and purchase price or current value, the rent roll or market rents if it is not yet leased, estimated taxes and insurance, and whether you are buying in your own name or an LLC. That is enough for me to give you a real answer rather than a range.
