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Are you a good candidate for a DSCR loan?

  • magda77dul
  • May 6
  • 2 min read


DSCR loans for investors

A DSCR loan (Debt Service Coverage Ratio loan) is a type of mortgage loan primarily used by real estate investors. Unlike traditional loans that rely on personal income verification, a DSCR loan is based on the income generated by the investment property itself. Lenders use the Debt Service Coverage Ratio (DSCR) to determine whether the property's rental income is sufficient to cover the loan payments.

How DSCR is Calculated

DSCR = Net Operating Income (NOI) / Total Debt Service

  • Net Operating Income (NOI): The rental income minus operating expenses (excluding loan payments).

  • Total Debt Service: The total mortgage principal and interest payments.

A DSCR of 1.0 means the property’s income covers its loan payment exactly.

  • Above 1.0 → Property generates more than enough income to cover debt.

  • Below 1.0 → Property does not generate enough income to cover debt.

Good candidates for DSCR (Debt Service Coverage Ratio) loans are typically real estate investors rather than traditional homebuyers. These loans are based on the income potential of the property, not the borrower's income, so the ideal borrower profile includes:

1. Real Estate Investors

  • Especially those buying rental properties (single-family, multi-family, or commercial).

  • Investors who want to scale their portfolios without hitting personal income or debt-to-income (DTI) limits.

2. Self-Employed or Non-Traditional Income Earners

  • People whose tax returns don’t reflect their true financial capacity due to deductions or fluctuating income.

  • Freelancers, business owners, or entrepreneurs.

3. Borrowers with Strong Property Cash Flow

  • Properties that generate enough rent to cover the mortgage payments (typically a DSCR of 1.0 or higher).

    • Higher DSCR (e.g., 1.25 or more) often leads to better loan terms.

4. Borrowers Looking for No-Doc or Low-Doc Options

  • Since DSCR loans don't rely heavily on personal financial documentation, they’re attractive to borrowers who prefer simplified qualification processes.

5. Foreign Nationals

  • Non-U.S. citizens who want to invest in U.S. real estate may not have U.S. credit or income documentation.

Want to learn more...



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