What is a DSCR loan, and who is it for?
A rental loan that qualifies on the property's rent instead of your tax returns.
Biscayne Lending 3 min read
If you own or are buying a rental and your tax returns understate what you actually earn, a DSCR loan is built for you. The lender asks one question, and it is not about your job:
Does the rent cover the payment?
The one number
DSCR stands for debt service coverage ratio. Divide the monthly rent by the full monthly payment — loan, property taxes, insurance, and HOA if there is one.
- Above 1.00, the rent covers the payment.
- Most lenders want 1.20 to 1.25, which leaves a cushion for a vacant month or a new roof.
- Below 1.00 the property loses money every month, and very few lenders will write it.
Rent $3,000 a month. Loan payment $2,100, taxes $250, insurance $120, HOA $30 — $2,500 in total. $3,000 ÷ $2,500 = 1.20. That is a deal most DSCR lenders will look at.
Drop the rent to $2,600 and the same property gives you $2,600 ÷ $2,500 = 1.04. Covered, barely. Expect a smaller loan, a higher rate, or a no.
What you do not have to provide
This is the part that surprises people. A DSCR lender generally does not ask for:
- tax returns
- W-2s or pay stubs
- an employment verification
- a debt-to-income calculation on you personally
It is the property being underwritten, not your job. That is why the loans suit the self-employed, people who write off heavily, and investors who already hold several properties.
What still matters
| What the lender checks | Why | Typical expectation |
|---|---|---|
| Credit score | Prices the loan | Often 660+, with better pricing above 720 |
| Down payment | Their risk cushion | Usually 20–25% on a purchase |
| The rent | It is the qualification | Lease, or market rent from an appraiser |
| Reserves | Can you survive a vacancy? | Often 3–6 months of payments, after closing |
| The entity | Most lend to an LLC | Formed and active with the state |
These are typical ranges across the market, not an offer. Each lender sets its own.
The mistake that costs people the loan
Using only principal and interest as "the payment". Taxes and insurance are part of what the rent has to cover. Leaving them out turns a 1.05 deal into a 1.25 deal on your spreadsheet — and back into 1.05 when the underwriter redoes it on day two.
Three ways to fix a thin ratio
- Borrow less. A smaller loan is a smaller payment and a higher ratio.
- Ask about interest-only. Some lenders qualify on the interest-only payment, which is lower.
- Improve the rate. More credit, a lower loan-to-value, or accepting a prepayment penalty each buy rate — and rate buys ratio.
What to have ready before you call
- The address, and the price (or today's value if you already own it)
- The rent — the lease if it is rented, comparable listings if it is not
- Annual taxes, the insurance quote, and any HOA
- A rough credit score
- How long you plan to hold it
Work out your own number
Our DSCR calculator does the arithmetic above with your figures, including the taxes and insurance people forget. It takes about a minute, costs nothing, and does not touch your credit.
When you want a real answer on a real property, tell us about the deal and a broker will come back to you with which lenders fit and why.
What next
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General information, not legal, tax or financial advice. Loan terms come only from a lender, in writing, after underwriting. Licensing and compliance rules differ by loan type and state.