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Cozy Porch

Investor Loans

A DSCR (Debt Service Coverage Ratio) investor loan is a game-changer for real estate investors looking to expand their portfolio without the hassle of traditional income verification. Instead of relying on personal income, DSCR loans qualify borrowers based on the rental income generated by the property, making them ideal for self-employed investors or those with complex financials. With flexible guidelines, no tax return requirements, and the ability to finance multiple properties, DSCR loans offer a streamlined path to building wealth through real estate.

Investor Loan Programs: DSCR Loan Guidelines

For real estate investors looking to expand their portfolio without the hassle of traditional income documentation, DSCR (Debt-Service Coverage Ratio) loans offer a streamlined solution. Unlike conventional loans that rely on tax returns, W-2s, or pay stubs, DSCR loans focus on the income-generating potential of the property itself.

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What is a DSCR Loan?

A DSCR loan is a mortgage designed for real estate investors where approval is based on the property’s cash flow rather than the borrower’s personal income. Lenders calculate the Debt-Service Coverage Ratio (DSCR) to determine if the rental income can cover the mortgage payment.

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How is DSCR Calculated?

The DSCR formula is:

DSCR=Gross Rental Income Total Monthly Debt Payments\text{DSCR} = \frac{\text{Gross Rental Income}}{\text{Total Monthly Debt Payments}}DSCR=Total Monthly Debt Payments Gross Rental Income​

  • A DSCR of 1.0 means the property breaks even (rental income = mortgage payment).

  • A DSCR above 1.0 means the property generates surplus cash flow.

  • A DSCR below 1.0 means the property does not fully cover the mortgage, which may require additional reserves or a larger down payment.

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DSCR Loan Guidelines

  • No personal income verification – No tax returns, W-2s, or pay stubs needed.

  • Minimum DSCR ratio: Typically 1.0 or higher, but some lenders allow lower ratios with compensating factors.

  • Loan amounts: Can go up to $5 million depending on the lender.

  • Down payment: Usually 20-25% but may vary based on DSCR ratio and borrower profile.

  • Credit score requirements: Minimum 620-680, but better terms are offered for higher scores.

  • Interest rates: Slightly higher than conventional loans, as these are considered investor-focused products.

  • Property types: Single-family homes, condos, townhomes, and multi-unit properties (usually up to 4 units).

  • Prepayment penalties: Often included, so check the loan terms if planning to refinance or sell early.

  • Reserves: Some lenders require 3-12 months of reserves, depending on the loan size and DSCR ratio.

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Who Benefits from a DSCR Loan?

  • Self-employed investors who do not show high personal income on tax returns.

  • Full-time real estate investors who want to qualify based on cash-flowing properties.

  • Investors expanding their portfolio who need a faster, more flexible financing option.

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Key Advantages of DSCR Loans

✔ No personal income verification – Focuses on the property’s income, not the borrower’s.
✔ Easier qualification – Ideal for investors with multiple properties and complex tax returns.
✔ Unlimited properties allowed – No cap on the number of financed properties (unlike conventional loans).
✔ Fast closing – Less paperwork means quicker approvals and funding.

DSCR loans are a game-changer for real estate investors who want a financing solution tailored to rental properties rather than their personal income. If you’re an investor looking for a flexible, scalable way to finance your next property, a DSCR loan could be the right fit.

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Want to see if you qualify? Let’s discuss your options!

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