The property qualifies, not your paystub.

How is DSCR calculated?

DSCR stands for debt service coverage ratio, and it is one division problem: gross monthly rent divided by monthly PITIA, meaning principal, interest, taxes, insurance, and HOA dues. A property renting for $3,450 against a $2,760 payment has a DSCR of 1.25. At 1.00 the rent exactly covers the payment.

Most programs set the floor at 1.00. A ratio of 1.20 to 1.25 earns meaningfully better pricing. Some lenders fund below 1.00, and "no-ratio" versions remove cash flow from qualification entirely in exchange for a larger down payment and more reserves.

The rent figure comes from your signed lease or from the appraiser's comparable rent schedule (Form 1007), and lenders typically use the lower of the two. For a short-term rental, expect to document 12 months of actual history through payout statements or 1099s.

Who is a DSCR loan built for?

Real estate investors, especially the ones conventional financing has already run out of room for. If you own four rentals and depreciation has driven your taxable income down, Fannie Mae's debt-to-income math will decline you no matter how much cash flow you actually collect. DSCR ignores that entirely. It also fits investors who want title held in an LLC, who are buying faster than tax returns can keep up, or who simply do not want their personal finances underwritten for a business transaction.

How much down payment does a DSCR loan require?

• 20% to 25% down is the standard; 15% is reachable at roughly 740+ FICO with a strong ratio on select programs.
• Cash-out refinances usually cap at 70% to 75% LTV, and often require a higher DSCR than a purchase.
• 3 to 6 months of PITIA in reserves is typical; expect 6 to 12 on cash-out, short-term rentals, or when several properties are in process at once.
• Loan amounts commonly run from about $100,000 to $3.5 million and beyond, and most lenders place no cap on how many properties you finance.

Do DSCR loans have a prepayment penalty?

Most DSCR loans carry one. A common structure is a step-down like 5/4/3/2/1: five percent of the balance if you pay off in year one, four percent in year two, and so on. Others use a flat percentage for three years. You can usually buy the penalty down or out in exchange for a higher rate, and some states restrict or prohibit them. Ask what the structure is and what the buyout costs before you lock, especially if you flip or refinance frequently.

What documents does a DSCR loan require?

• Purchase contract, or the existing note and mortgage statement on a refinance.
• Current lease and proof of rent received if the property is tenanted, usually two months of deposits matching the lease.
• Appraisal with a Form 1007 rent schedule. On a short-term rental, 12 months of payout statements or a 1099 from the platform.
• Two months of asset statements covering down payment, closing costs, and reserves.
• Entity documents if vesting in an LLC: articles, operating agreement, EIN letter, certificate of good standing.
• A schedule of real estate owned with mortgage statements, tax bills, and insurance for every property.
• Insurance quote including landlord coverage, and rent-loss coverage where required. Photo ID and a signed application.

What are the advantages of a DSCR loan?

• Zero personal income documentation: no returns, no W-2s, no DTI
• Scales indefinitely; write-offs on your returns are irrelevant
• Title can be held in an LLC for liability and privacy
• Fast to close, because the underwriting is mostly about the property
• No employment verification, which suits recently self-employed buyers

What are the trade-offs of a DSCR loan?

• Prepayment penalty on most versions
• Investment property only. You cannot live in it
• Rates higher than owner-occupied Non-QM, and a higher down payment
• A low appraisal or weak market rent can sink an otherwise fine deal
• Tax and insurance increases directly erode the ratio, at closing and at renewal

Why do DSCR loans get declined?

• Appraised market rent comes in below the lease. A lease at $3,450 and a 1007 at $2,900 is underwritten at $2,900, and the ratio may no longer clear.
• Final taxes and insurance land higher than estimated, pushing PITIA up and DSCR below the floor. Common on new construction and in states with sharp insurance increases.
• The appraisal comes back "subject to" repairs, or the property is not rent-ready.
• Condo project ineligibility: litigation, high investor concentration, inadequate reserves, or a failed project review.
• Reserves fall short once cash-to-close is subtracted from the same account.
• Short-term rental income cannot be supported, or the municipality restricts STRs at that address.
• Entity paperwork incomplete: no operating agreement, entity not in good standing, or members who are not on the guaranty.
• A credit event that is not seasoned, or a mortgage late on another property in the portfolio.

What does a typical DSCR loan file look like?

A W-2 project manager with four rentals bought over six years. Depreciation and repairs mean his tax returns show a paper loss on the portfolio, so his last conventional application was declined on debt-to-income despite $4,100 of monthly net cash flow. He is buying a fifth property, a $410,000 duplex renting for $3,450 against a $2,760 PITIA, in an LLC, and his personal income is never discussed. FICO 728, 25% down, DSCR 1.25, 6 months of reserves, 5/4/3/2/1 prepay.

About these figures: the ranges on this page describe the non-QM lending market as of September 2026. They are not quotes, offers, or commitments to lend. Guidelines, rates, and program availability vary by lender, property type, and borrower profile, and they change often. Your terms are set after a full review of your credit, income documentation, assets, and the property. Not tax or legal advice. Equal Housing Opportunity.