What Is a DSCR Loan in Real Estate?

A DSCR loan (Debt Service Coverage Ratio loan) is a type of mortgage used by real estate investors to qualify based on the property's rental income—not their personal income. These loans focus on the cash flow of the investment property.

✅ How a DSCR Loan Works

A DSCR loan evaluates whether the rental income from the property can cover the monthly mortgage payment. This ratio (DSCR) allows investors to qualify without showing traditional W-2s or tax returns.

  • Approval based on rental income only
  • Minimal documentation required
  • Ideal for investors building or scaling portfolios
  • Works for long-term rentals and short-term (Airbnb) rentals

💡 When a DSCR Loan Makes Sense

DSCR loans are designed for real estate investors who want to qualify using property income instead of personal income. They work especially well when:

  • You own multiple investment properties
  • You prefer simplified underwriting
  • You have strong rental income performance
  • You plan to expand your rental portfolio
  • You use STR (Airbnb/VRBO) income to qualify

Many investors choose DSCR loans alongside Non-QM mortgages or portfolio loans.

📉 Risks of DSCR Loans

  • Higher rates than conventional investor loans
  • Larger down payments typically required
  • Qualification depends on rental performance
  • Cash flow issues can impact approval

If rental income declines, refinancing can become more difficult. Compare DSCR loans with hard money loans for short-term projects or bridge loans if you need temporary financing.

🏠 Investing in a rental property and need flexible financing?

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