DSCR Investment Property Loans

A DSCR (Debt Service Coverage Ratio) Investor Mortgage is a type of loan designed for real estate investors that qualifies borrowers based on the income potential of the property rather than their personal income. This makes it an excellent option for investors who may not have traditional W-2 income or want to avoid using personal tax returns for loan approval.

🔹 How Does a DSCR Loan Work?

Instead of looking at your personal debt-to-income ratio (DTI), lenders assess the Debt Service Coverage Ratio (DSCR), which measures the property's ability to generate enough rental income to cover the loan payments.

🔹 DSCR Formula:

Take the Gross Rents, Appraisal Form 1007/216 - Estimated Monthly Rental Income, or an income estimate from a service provider such as AirDNA that some lenders allow, divide the monthly rental income by the monthly Principle, Interest, Property Tax, Insurance, and any Association Dues. 

Example: Monthly Rental Income - $2300/$1350 - PITIA = 1.7 DSCR Score

➡️ A DSCR of 1.0 means the property breaks even (income covers expenses).

➡️ A DSCR above 1.0 means the property generates positive cash flow.

➡️ A DSCR below 1.0 means the property doesn’t fully cover its costs, which may require a larger down payment, a higher interest rate or may be denied.

➡️ Key Features of a DSCR Loan:

✅ No Personal Income Verification – Approval is based on property cash flow, not personal income or tax returns.
✅ Easier Qualification for Investors – Ideal for self-employed investors or those with multiple rental properties.
✅ Can Finance Multiple Properties – No cap on the number of financed properties like traditional loans.
✅ Flexible Down Payments – Typically requires 20-25% down.
✅ Use Rental Income to Qualify – Helps investors leverage their property’s earning potential.

✅ No limit on the number of properties owned – No worries about putting all properties under LLC's.

🔹 Who Should Consider a DSCR Loan?

➡️ Real estate investors looking to expand their portfolio.

➡️ Self-employed or non-traditional earners who don’t show high personal income on tax returns.

➡️ Investors who want to scale without affecting their personal debt-to-income ratio.

🔹 A DSCR Investment loan is an incredible tool to have for any investor, especially those looking to build a portfolio of units.