DSCR Loan
Highlights of the DSCR Loan
(1) No personal income verification required. (2) Easy approval for investors. (3) Can be used for a variety of investment properties.
Eligibility
Here are some of the eligibility requirements for the DSCR Loan program. Select ‘Get Started’ to check if you’ll be a good fit.
Lenders usually want the property’s rental income to at least cover the loan payment (principal, interest, taxes, and insurance). A ratio of 1.0 means the income and expenses break even, but most lenders prefer 1.2 or higher for a safety cushion.
A credit score of 620+ is often required, though some lenders may allow lower scores with higher down payments or interest rates.
Most DSCR loans require a down payment of 20-25% for investment properties, though terms may vary by lender.
The property needs to have a valid lease or demonstrated rental income potential to qualify.
Lenders may require 3-6 months of mortgage payments in reserves to ensure the borrower can handle unexpected vacancies.
Can be used for single-family homes, multi-family units, condos, and even short-term rentals like Airbnb.
Common Questions
What does DSCR stand for?
DSCR is short for Debt-Service Coverage Ratio.
How does it work?
A DSCR loan is designed for real estate investors. Instead of verifying your personal income, lenders focus on whether the property’s rental income covers the loan payment.
Do I need to show personal income or tax returns?
Nope! One of the biggest perks of a DSCR loan is that you don’t need to provide personal income documentation or tax returns.
Are DSCR loans available for first-time investors?
Yes, but experience may be a plus. Some lenders may prefer borrowers with prior real estate investment experience, but it’s not always required.
Other Info
Interest Rates May Be Higher
Because DSCR loans are considered riskier than traditional loans, interest rates may be slightly higher. However, the flexibility and ease of qualifying often make it worth it for investors.
Prepayment Penalties Are Common
Some DSCR loans come with prepayment penalties, meaning you may be charged a fee if you pay off the loan early. It’s important to ask about this before committing.
Future Rental Income Can Be Considered
For properties that aren’t rented yet (like new builds or short-term rentals), lenders may use projected income based on comparable market rents.