Qualify On The Rent,
Not Your Tax Returns.
A DSCR loan asks one question about you and a lot of questions about the property. If the rent covers the payment, you have a path. No W-2s, no tax returns, no explaining to an underwriter why your Schedule E looks the way it does.
Start Here
What A DSCR Loan
Actually Is
Here is the conversation I have most often with investors. Somebody has four rentals, all of them cash flowing, and their conventional lender just told them no. Not because the deals are bad. Because the write-offs that make the properties worth owning also make their tax returns look like they barely earn anything.
That is the problem a DSCR loan solves. DSCR stands for debt service coverage ratio, and it is one number: the property's monthly rent divided by the property's monthly payment. If that number is at or above 1.0, the rent covers the payment. Most lenders will look at the deal on that basis alone.
Your personal income never enters the file. No W-2s, no tax returns, no pay stubs, no debt-to-income calculation on your own household. The property either supports the loan or it does not. That is also why these loans are for investment property only. If you plan to live in it, this is the wrong product and any lender telling you otherwise is doing you harm.
Two places to go deeper: what a DSCR loan is covers the definition and who it fits, and how DSCR loans work walks the file from application to closing.
The Math
The Ratio, Worked Out
On A Real Deal
The denominator is the part people get wrong. It is not principal and interest. It is the full monthly housing cost the lender will carry, which the industry calls PITIA: principal, interest, taxes, insurance, and association dues.
Take a $250,000 rental with 25% down at 7.5% on a thirty year term. Here is what the lender is dividing.
| Line | Monthly | Where it comes from |
|---|---|---|
| Principal & interest | $1,311 | $187,500 loan at 7.5%, 30 years |
| Property taxes | $229 | $2,750 a year, divided by twelve |
| Insurance | $150 | $1,800 a year, divided by twelve |
| Association dues | $0 | Single family, no association |
| Total payment | $1,690 | This is the denominator |
| Market rent | $2,000 | Appraiser's rent schedule, not your guess |
| DSCR | 1.18 | $2,000 divided by $1,690 |
1.18 clears the common 1.0 threshold with room to spare, and above roughly 1.20 you tend to see the widest lender choice and the best pricing. Notice what moved that number. Not your credit, not your income. Taxes and insurance. That is why the same purchase price produces a very different ratio in two different states, and why I ask for a real insurance quote early instead of guessing.
The rent figure matters just as much. Lenders use the appraiser's market rent schedule, a form called the 1007, not the number you hope to charge. If your lease is above market, the lender usually takes the lower of the two. Calculating DSCR goes through more scenarios, including two to four unit properties.
Free Tool
Run Your Own Numbers
Move the sliders to your deal. The ratio updates as you go. This is an estimate to help you think, not an approval, and the insurance figure is the one worth replacing with a real quote.
Property Details
Insurance is the input most people underestimate, and on the coast it is the one that decides the deal. Put a real quote in this box before you go under contract.
Monthly Payment Breakdown
Want the real numbers on a specific address instead of a slider?
Get My DSCR NumbersQualifying
What It Takes
To Get Approved
Guidelines move by lender and by program, so treat these as the shape of the thing rather than a rule book. What follows is what I see most often.
| Requirement | Typical guideline |
|---|---|
| Occupancy | Investment property only, never a primary residence |
| Qualification basis | The property's rental cash flow |
| Down payment | Often 20% to 25%, more on a weaker ratio |
| Credit score | Often 660 and up, with better pricing above 720 |
| DSCR | Commonly 1.0 and up, some programs go below with more down |
| Appraisal | Required, with a market rent schedule |
| Entity vesting | LLC or corporation often allowed, program dependent |
| Property types | Single family, condo, 2 to 4 unit, short-term rental varies |
| Reserves | Often 3 to 6 months of payments after closing |
Reserves are the one that surprises people. The down payment is not the whole cash requirement. Plan on several months of payments still sitting in an account after you close. Full DSCR requirements has the detail, including how reserves are counted and what documents you actually send.
What You Can Do With One
Six Ways Investors
Use This Loan
The ratio is the same in every case. What changes is the goal, and the goal changes which lender fits. Here is where each one leads.
Buy A Rental
The straightforward case. You are under contract on a property and the rent supports the payment. Nothing about your income enters the file.
DSCR PurchaseRefinance A Rental
You own it, the rate is wrong, or a hard money loan is coming due. A rate and term refinance replaces what you have without pulling money out.
DSCR RefinancePull Cash Out
Equity in one property becomes the down payment on the next. This is how most portfolios past three or four doors actually get built.
DSCR Cash-OutFinance A Short-Term Rental
Some programs will use short-term rental income, some will only use long-term market rent. Which lender you pick decides the answer, so ask before you go under contract.
DSCR For Short-Term RentalsClose In An LLC
Many DSCR lenders allow title to be vested in an entity. If you are building a portfolio and want liability separation, say so at the start rather than at the closing table.
DSCR In An LLCInvest From Abroad
Foreign national programs exist and they work, with a larger down payment and a different document set. Fewer lenders offer them, so the shopping matters more.
DSCR For Foreign NationalsHow It Compares
When Something Else
Is The Better Loan
A DSCR loan is not automatically the right answer just because you are buying a rental. Four honest comparisons.
Versus Conventional
If your tax returns show real income and you have not hit the ten financed property limit, conventional financing usually prices better. DSCR earns its keep when the returns do not tell the story or the property count is in the way.
DSCR vs ConventionalVersus Hard Money
Hard money is faster and far more expensive. If the property needs work before it can rent, hard money may be the only option that fits, then a DSCR refinance takes it out once it is stabilized.
DSCR vs Hard MoneyVersus A Bank Statement Loan
Both skip tax returns. A bank statement loan still qualifies on your income, just measured through deposits, and it can be used on a home you live in. DSCR cannot.
DSCR vs Bank StatementVersus A Commercial Loan
Past four units you are usually in commercial territory, with shorter terms and balloon payments. DSCR keeps the thirty year fixed structure on one to four unit residential.
DSCR vs CommercialRead This Before You Apply
What I Would Want
Told To Me
Three things about DSCR loans that do not make it into most lender marketing, including mine until now.
- The rate is higher than conventionalYou are trading documentation for price. On a deal that would also qualify conventionally, you are usually paying for convenience you do not need.
- Most of these loans carry a prepayment penaltyThree years is common, five exists, and it is negotiable at the pricing stage rather than after. If you might sell inside that window, the penalty structure matters more than an eighth of a point on the rate.
- A thin ratio is a warning, not just an approval problemIf a deal only pencils at 1.01 with an optimistic rent, one vacancy or one insurance renewal turns it negative. Sometimes the right answer is a different property.
None of that means the loan is bad. It means it is a tool with a shape. The honest pros and cons lays out both sides, and prepayment penalties explains the structures so you can ask for the one that fits how long you plan to hold.
Where
Investors In 33 States
I am based in Lake Charles, Louisiana and work with investors across the states below. Each state page covers what actually changes the math there: property taxes, insurance, closing practice, and the local markets investors are buying in.
Common Questions
DSCR Loan FAQ
The Application
Apply From Your Phone In Fifteen Minutes
No tax returns and no pay stubs. The application runs on your phone, and we qualify the property on the rent it brings in.
- Starts with a soft credit check, so your score is never touched
- No tax returns, the property qualifies on the rent it brings in
- Upload documents with your phone camera, no scanner needed
- You hear back from Channing, not from a call center queue
If the numbers say wait, I'll tell you that too, and then we make a plan to fix whatever is in the way.
Complete Your Application
Five short steps. Most people finish in about fifteen minutes.
- Tell us what you're looking for
- We check the property's rent
- Upload your documents
Your pre-approval letter is ready. I sent it to your email and to your agent.
Got your application. I'm reviewing it now and will call you this afternoon.
Real Closings
Real Clients.
Real Closings.
Real families we have helped get from pre-approval to keys in hand.
Send Me The Address
And The Rent
That is enough to run the ratio with a realistic insurance number and tell you where the deal actually stands. If it does not work, I will tell you that too, and what would have to change for it to.
Get My DSCR NumbersMortgages by Channing · 337-476-2623 · NMLS #1457759
