What is a DSCR loan, and how do I qualify for one?

How does a DSCR loan work?

We compare the property's monthly rent with its full monthly payment (principal, interest, taxes, insurance, and HOA dues):

• Rent $3,000 ÷ payment $2,700 = 1.11. The property pays for itself, which is what most programs want to see.
• A lower ratio can sometimes work with a bigger down payment.

There are no personal tax returns or pay stubs. The rent comes from a lease or the appraiser's rent estimate.

Who is it for?

• Real estate investors buying or refinancing rentals, including cash-out
• Self-employed investors whose tax returns don't show their real income
• Investors who own several properties and have outgrown regular loan limits

It's for investment properties only, not the home you live in.

What does it cost?

• Higher rates than a conventional investment loan
• Down payment of about 20% to 25%, depending on credit and the ratio
• Prepayment penalties are common, often for the first few years. I'll show you the penalty terms and options with shorter or no penalty (they usually cost a bit more in rate).
• Closing costs similar to other loans, plus any points you choose

Example scenario (illustrative)

An investor in Orlando wants a $350,000 single-family rental. The appraiser estimates rent at $2,600, and the full payment with 25% down comes to about $2,350, a ratio of about 1.1. He qualifies without showing any personal income, and chooses a three-year prepayment penalty in exchange for a lower rate.

Our take

DSCR loans are one of the best tools for growing a rental portfolio, as long as the property truly cash-flows. I'll run the ratio with real rent and real insurance quotes, and show you the prepayment terms before you commit.