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A Debt Service Coverage Ratio (DSCR) loan is a non-QM mortgage for investment properties that qualifies borrowers based on property cash flow (rental income) rather than personal income or tax returns. Loans typically require 20–25% down, 620+ credit scores, and a 1.0 DSCR ratio, offering up to $2M–$5M for purchases or cash-out refinances.
Key DSCR Loan Parameters
Purpose: Investment properties only (non-owner occupied).
Qualifying Metric: DSCR = Gross Rental Income / Total Debt Service (PITI + HOA).Minimum DSCR
Ratio: Usually 1.0 – 1.25.Down Payment: Typically 20%–25%, though 10%–15% may be available.
Credit Score: Minimum 620–660+.
Loan Amount: Generally $100,000 to $5,000,000.
Loan-to-Value (LTV): Up to 75%–80%.Reserves: 6–12 months of PITIA payments.
Benefits & Features
No Income/Employment: No personal income verification, tax returns, or W-2s required.
Unlimited Properties: No limit on the number of properties financed.
Fast Closing: Can close in as little as 3-4 weeks
Loan Terms: Usually 30-year fixed or adjustable-rate mortgages (ARMs).
Requirements & Documentation
Appraisal: Must include a rent schedule/market rent analysis.
Lease Agreement: Current leases, or market rent for vacant units.
Documentation: Purchase contract, mortgage statements, tax/insurance info.
Property Types: Single-family, 2-4 units, condos, and sometimes short-term rentals (Airbnb).
How DSCR is Calculated
A ratio of 1.0 means the property breaks even. A ratio of 1.25 means the property produces 25% more income than the debt payment, which is preferred by most lenders.
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