DSCR Loans: The Simple Way to Buy Rental Properties
What is a DSCR Loan?
A DSCR loan lets you buy or refinance an investment property using the property’s rental income — not your personal income or tax returns.
Perfect for real estate investors, Airbnb hosts, or anyone who owns rental homes. DSCR stands for Debt Service Coverage Ratio. It’s a simple math formula lenders use to make sure the property “pays for itself."
How Does the Math Work?
Lenders divide the property’s monthly rent by the projected total monthly mortgage payment. This total mortgage payment is referred to as "PITI" which is an acornym for Principal + Interest + Taxes + Insurance. Below is the formula the underwriter will use to determine the ratio:
DSCR = Monthly Rent ÷ PITI Payment
The Minimum required ratio is 0.75
That means the rent only needs to cover 75% of the new payment. Yes — you can qualify even if the rent is a little short!
How Do Lenders Figure Out the Rent?
They use one of these two numbers — whichever is lower:
1. Your current lease agreement → If the property is already rented, they use the actual rent you’re collecting.
2. Appraiser’s projected market rent (Form 1007)→ If it’s vacant or the lease is below market, the appraiser estimates what similar units rent for.
The lender always takes the conservative (lower) number to keep things safe.
Real-Life Example
- Purchase price: $1,000,000
- Loan amount: $750,000 @ 6.5% interest (30-year fixed)
- Monthly Principal + Interest: $4,740.51
- Property taxes (1.25% of purchase price): $1,041.67/month
- Homeowners insurance: $150/month
- Total PITI payment: $5,932.18
- Current lease: $4,600/month
- Appraiser says market rent: $4,800/month
Lender uses $4,600 (the lower number).
$4,600 ÷ $5,932.18 = 0.775 DSCR → Approved! (Above the 0.75 minimum)
Why Investors Love DSCR Loans
- No tax returns
- No pay stubs or W-2s
- No personal income required
- Unlimited properties allowed
- Cash-out refinances available
- 30-year fixed rates
- Up to 80% LTV (20% down)
- Only slightly higher rates than traditional full documentation loans
Ready to See Your Numbers?
Call is with your property address and we'll run a free DSCR scenario customized to your current rental or one you're considering purchasing — with our extremely competive rates!