Rental / DSCR
The rent qualifies the loan, not your tax returns
A DSCR loan is underwritten on whether the property's rent covers its own payment. No W-2s, no tax returns, no debt-to-income calculation on you personally — which is why self-employed investors and people with a dozen properties use them.
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How a DSCR loan works
DSCR is a ratio: the monthly rent divided by the monthly cost of owning it — principal, interest, taxes, insurance and any association dues. At 1.00 the rent exactly covers the payment. Lenders give their best terms comfortably above that.
Because the property qualifies itself, the paperwork is short compared with a conventional mortgage: a lease or a market rent appraisal, insurance, the entity documents and a credit report. Most are written to an LLC rather than to you personally.
They come as long-term loans, commonly thirty years, often with an interest-only option for the early years. Most carry a prepayment penalty in the first few years, which is the trade for the easier qualification — ask what it is before you sign, because it decides what selling early costs you.
What lenders actually look at
The ratio itself
Rent against the full monthly cost. A ratio under 1.00 does not automatically stop a deal, but it narrows the lenders and cuts the loan.
Value and equity
Loan-to-value on a purchase, and on a refinance how much equity is left afterwards. Each lender publishes its own ceiling.
Credit
Published minimums vary widely between lenders. Score usually moves your leverage and your rate rather than deciding the file.
The lease
A signed lease, or a market rent appraisal when it is empty. Short-term and holiday rentals are treated differently by different lenders.
Seasoning
On a cash-out refinance, how long you have owned it. Many lenders want a period of ownership before lending against the appraised value.
Reserves
Months of payments in the bank after closing. Almost every programme asks for some.
Questions we get asked
Do I need to show income?
Not personally, in the usual sense. The property's rent is what qualifies the loan. You will still provide identification, entity documents, insurance and a credit report.
What ratio do I need?
It varies by lender. Most publish a minimum, and the best terms sit above it. Some will write below 1.00 with lower leverage; a few offer a no-ratio option. We will tell you which ones, for your numbers.
Can I buy in an LLC?
Usually yes — most DSCR lending is written to an entity, and several require it. The owners typically sign a personal guarantee.
Can I take cash out?
Often, subject to the lender's maximum and to how long you have owned the property. Seasoning rules differ meaningfully between lenders, so it is worth asking early.
Is there a prepayment penalty?
Usually, for the first few years, and the structure varies. Ask what it is before you sign — it decides what selling or refinancing early will cost.
What about a short-term rental?
Some lenders will use short-term rental income, some will not, and those that do often want a documented history. It changes which lenders fit.
How much can be financed
The highest figures published by the 5 cited lenders on our desk for this product. Whichever cap is lowest for your deal is the one that applies.
Up to
80%
Of current value
on a refinance
These are maximums, not what everyone gets: the top of a range is reserved for the strongest files, and what is available depends on the lender, the property, your experience and your credit. This is not an offer — terms are set by a lender in writing after underwriting.
Who a DSCR loan is for
- Self-employed investors whose tax returns show write-offs rather than income.
- Anyone already holding several properties, where a conventional lender has started counting mortgages.
- Buyers purchasing through an LLC, which most DSCR programmes expect rather than discourage.
- W-2 earners who simply do not want their personal debt-to-income ratio to decide a rental purchase.
- Owners refinancing a rental out of a hard money or bridge loan into something long-term.
What people use them for
- Buying a single-family rental, a duplex or a small apartment building.
- Refinancing a rental to a lower payment or a longer term.
- Taking cash out of a rental to fund the next purchase.
- Refinancing out of a fix & flip loan when the plan changed to holding it.
- Buying a short-term or holiday rental, where the lender accepts that income.
- Moving a property into an LLC while refinancing it.
The words lenders use, in plain English
You do not need these to start an application. They are here because knowing them makes every conversation with a lender shorter.
- DSCR
- Debt Service Coverage Ratio. The rent divided by the full monthly cost of owning the property. At 1.00 the rent exactly covers the payment; at 1.25 there is 25% more rent than payment.
- PITIA
- Principal, Interest, Taxes, Insurance and Association dues — the whole monthly cost. This is the bottom of the DSCR calculation, not just the mortgage payment.
- LTV
- Loan-to-value. The loan as a share of what the property is worth. A $300,000 loan on a $400,000 property is 75% LTV.
- Market rent
- What the property should rent for, judged by an appraiser, used when it is empty or rented below market to a relative.
- Seasoning
- How long you have owned it. Many lenders want a period of ownership before lending against the appraised value rather than what you paid.
- Reserves
- Months of payments the lender wants you to still have in the bank after closing.
- Prepayment penalty
- A fee for repaying early, common on DSCR loans for the first few years. It decides what selling or refinancing early actually costs.
- No-ratio
- A programme that does not calculate DSCR at all, usually at lower leverage. Useful when the rent is thin or the property is empty.
How the arithmetic works
Illustrative arithmetic to show how a lender thinks, using round numbers. Not an offer, not a quote, and not terms available to anyone in particular — real figures depend on the lender, the property and your file.
A duplex that covers itself
Rent $3,200 a month. Taxes $400, insurance $150, no association dues. If the loan payment came to $1,900, the full monthly cost is $2,450 and the DSCR is 3,200 ÷ 2,450 = 1.31. Comfortably above where most programmes want to be.
A house where the rent is thin
Rent $2,100. Taxes $380, insurance $160, dues $120. If the payment were $1,600, the cost is $2,260 and the DSCR is 0.93 — under 1.00. The usual fixes are a smaller loan, a larger deposit, or a lender with a no-ratio programme.
Pulling cash out
A rental worth $500,000 with $250,000 owed. At 75% LTV the new loan would be $375,000; after paying off the $250,000 and the closing costs, the rest comes back to you. The DSCR is then tested against the new, larger payment — not the old one.
Empty at the moment
No lease, so the appraiser sets a market rent instead. That figure becomes the top of the DSCR calculation. Some lenders reduce leverage on a vacant property; others do not.
What you will be asked for
Short compared with a conventional mortgage, because the property is doing the qualifying. There are no tax returns on this list.
- Photo ID for everyone on the loan
- The purchase contract, or the current mortgage statement on a refinance
- The lease, or a rent roll if there is more than one unit
- Evidence of insurance, or a quote if you have not bound it yet
- Your LLC papers: articles of organization, operating agreement, EIN letter
- A recent bank statement showing the deposit and reserves
- Authorisation to pull credit
- For a short-term rental, a revenue history if you have one
From enquiry to closing
- 1
Tell us the deal
The property, the rent and the value. Four short questions is enough for us to see which lenders on our desk fit before anybody pulls credit.
- 2
We look at the options
We compare your numbers against what the lenders we work with publish, and come back with what actually fits rather than the first one that answers the phone.
- 3
Application and documents
You get a checklist of the short list above. Documents upload straight into your own page — no email chains.
- 4
Appraisal and title
The lender orders an appraisal with a rent schedule and title work begins. This stage sets the timeline more often than underwriting does.
- 5
Underwriting
The lender checks the rent against the payment, the value, your credit and your entity. Conditions usually come back; we clear them with you.
- 6
Closing
Final figures, signing, and funding. On a refinance there may be a short rescission period depending on the transaction.
What goes wrong
Forgetting taxes, insurance and dues
People calculate DSCR against the mortgage payment alone and get a number well above the real one. Association dues sink more condo deals than anything else on this list.
Not asking about the prepayment penalty
It is the trade for the easier qualification. If you might sell within three years, the structure of that penalty matters more than a small difference in rate.
Assuming a cash-out can happen immediately
Many lenders want a period of ownership before lending against the appraised value. Ask before you plan around the money.
Using an optimistic rent
The appraiser's rent schedule governs, not the number on a listing site. If your figure is high, the loan gets sized down late in the process.
Buying personally, then trying to move it
Most of this lending is written to an entity. Setting the LLC up first is far simpler than transferring the property afterwards.
Treating every DSCR lender as the same
Minimum ratios, credit floors, seasoning and short-term rental rules vary widely. Knowing which desk writes what is the whole reason to bring us the file.
Related financing
- Fix & Flip →If the property needs work before it can be rented or sold.
- Bridge loans →To close quickly now and refinance into a DSCR loan once it is stabilised.
- Hard money →When the deal or the timeline does not suit a long-term lender yet.
- Commercial real estate →For five or more units, which is underwritten differently.
Tell us about the property
Four short steps. The rent and the value are the two that matter most.
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This is not an offer and not an approval. Terms are set by a lender, in writing, after underwriting, and vary by lender, by property and by file.
Buying or refinancing a rental?
Send us the rent, the value and what is owed. We will come back with what the lenders on our desk actually publish.