DSCR Investment Loans
Investment financing that generally evaluates rental income against the property’s qualifying housing expenses.
What is a DSCR loan?
A DSCR loan (Debt Service Coverage Ratio loan) is designed for borrowers purchasing or refinancing an income-producing investment property. Qualification generally focuses on the property’s rental income compared with its mortgage payment, property taxes, insurance, and applicable association dues.
Why borrowers apply
- They want to qualify primarily using the property’s rental income.
- They are self-employed or have complex personal income.
- Their tax returns show substantial deductions that make traditional income qualification difficult.
- They want to purchase additional rental properties.
What they use it for
- Buying a long-term rental property.
- Financing an eligible short-term or vacation rental.
- Refinancing an existing investment property.
- Taking cash out of an investment property to renovate, purchase another rental, or meet other permitted needs.
Example
A property rents for $3,000 per month, and its qualifying monthly housing expenses are $2,400. Its DSCR is 1.25, meaning rental income covers 125% of those expenses.
DSCR loans are generally for business-purpose investment properties, rather than a borrower’s personal residence. Credit, down payment, reserves, rental-income requirements, and eligible uses vary by lender.
