DSCR loan

A Debt-Service Coverage Ratio (DSCR) loan qualifies the borrower based on the property's income, not personal pay stubs. The coverage ratio is rent divided by the mortgage payment.

Formula: DSCR = NOI ÷ Annual Debt Service.

What lenders look for

• DSCR ≥ 1.25 typical for best pricing.
• DSCR ≥ 1.0 available, higher rate.
• DSCR < 1.0 ("no-ratio") possible, expensive.

Typical terms

• 20–25% down.
• Rate ~1–2% above conventional owner-occupant.
• 30-year amortization, fixed or interest-only options.
• Closed in an LLC commonly accepted.
• No personal income docs; lender reviews credit + property.

When DSCR makes sense

• Self-employed borrowers with hard-to-document income.
• Investors past Fannie's 10-loan limit.
• BRRRR cash-out refinances.
• LLC closings.