DSCR Loans for Rental Property Investors
A DSCR loan is a long-term rental property loan qualified mainly on the property rental income compared to its monthly payment, rather than on your personal income.
It fits investors buying or refinancing 1 to 4 unit rentals, short-term rentals, and small multifamily properties, especially self-employed investors.
DSCR Loans quick facts
These are the typical terms for DSCR loans. Your actual terms depend on underwriting.
| Typical amount | $100,000 to $3,000,000+ |
|---|---|
| Typical term | 30-year fixed, with interest-only and ARM options |
| Typical funding speed | Typically 21 to 45 days |
| Typical minimum requirements | 1.0x+ DSCR (some programs lower), 620 to 680+ credit, 20% to 25% down |
| Cost structure | Interest rate based on credit, leverage, and DSCR, plus closing costs |
DSCR Loans: good fit or not?
This option works well for some situations and is a poor match for others.
Good fit
- Self-employed investors with complex tax returns
- Long-term and short-term rental properties
- Investors growing a portfolio beyond conventional limits
- Cash-out refinances to fund the next acquisition
Not a good fit
- Primary residences or second homes
- Properties needing major renovation (consider fix and flip)
- Properties where rent will not cover the payment
Documents usually needed
Having these ready typically speeds up review. A funder may request additional items.
- Application and credit authorization
- Purchase contract or current mortgage statement
- Lease agreements or short-term rental history (refinance)
- Two months of bank statements for down payment and reserves
- Entity documents if closing in an LLC
- Insurance quote
DSCR Loans: how it works
The process typically follows 4 steps from first conversation to funding.
Share the property
Send the address, price or value, and expected rent.
Get pricing
We compare DSCR programs and present rate and leverage options.
Appraisal and rent survey
The appraisal confirms value and market rent.
Close
Sign at closing, often in your LLC.
DSCR Loans vs. Fix and Flip Loan
The main difference comes down to structure, cost, and timing. Here is how they typically compare.
| Feature | DSCR Loans | Fix and Flip Loan |
|---|---|---|
| Purpose | Long-term rental hold | Short-term renovation and resale |
| Typical term | 30 years | 6 to 18 months |
| Qualifies on | Rental income vs. payment | Purchase price, rehab budget, and ARV |
| Rate | Lower | Higher |
Typical characteristics. Terms vary by funder and file.
DSCR Loans FAQs
How is DSCR calculated on a rental property?
For most DSCR loans, DSCR equals monthly rent divided by the monthly payment including principal, interest, taxes, insurance, and HOA dues. For example, $2,400 rent divided by a $2,000 payment equals 1.20.
What is the minimum DSCR?
Many programs look for 1.0 or higher. Some allow lower ratios, or no ratio, with more down payment or higher pricing.
Do DSCR loans require tax returns?
Typically no. DSCR loans are qualified on property income, so personal income documentation is usually not required.
Can I use a DSCR loan for an Airbnb or short-term rental?
Many funders allow short-term rentals and may use rental history or market data to estimate income.
Is there a prepayment penalty on DSCR loans?
Many DSCR loans include a prepayment penalty, often a step-down over 1 to 5 years. Some programs allow no penalty at a higher rate.
Can I close a DSCR loan in an LLC?
Yes. Most DSCR funders allow vesting in an LLC with a personal guarantee.