What Is a DSCR Loan & How Does It Work?
If you’re a real estate investor looking for an easier way to qualify for financing, a DSCR loan might be exactly what you need. Unlike traditional mortgages that rely on your personal income and tax returns, DSCR loans focus on one thing: the income your investment property generates.
What Does DSCR Mean?
DSCR stands for Debt Service Coverage Ratio — a measure of how well a property’s income covers its debt payments.
In simple terms, it tells lenders whether your rental property earns enough money to pay for itself.
Here’s the basic formula:
DSCR = Net Operating Income ÷ Total Debt Payments
A DSCR of 1.0 means the property breaks even (it earns just enough to cover the mortgage).
A DSCR above 1.0 means the property generates positive cash flow.
The higher the DSCR, the stronger the investment looks to lenders.
How a DSCR Loan Works
Instead of reviewing your pay stubs or W-2s, lenders look at your property’s rental income and expenses. If the rent can cover the mortgage and operating costs, you can qualify — even without traditional income documentation.
That makes DSCR loans an excellent option for:
Real estate investors and landlords
Airbnb and short-term rental owners
Self-employed borrowers
Investors with multiple properties or LLCs
Key Benefits of a DSCR Loan
No personal income verification – Qualify based on property cash flow, not your job history
Flexible ownership options – Close in your name or your business entity (LLC)
Quick closings – Fewer documents and faster underwriting
Ideal for expanding portfolios – Great for investors buying or refinancing multiple properties
Typical Requirements
While DSCR loans are more flexible than traditional mortgages, most lenders still look for:
Minimum credit score around 640+
Down payment of 20–25%
Positive cash flow from the property
Appraisal with a market rent schedule
Is a DSCR Loan Right for You?
If you earn income from rental properties or plan to start investing, a DSCR loan could be the simplest way to qualify. You can use it to buy, refinance, or cash out — all based on what your property earns, not what you do for work.
At Chris Lewis. | Home Loans, we specialize in helping investors leverage their properties to grow their portfolios. Let’s talk about how a DSCR loan can help you build long-term wealth through real estate.