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Program

DSCR loans to invest using the property’s rent

With a DSCR loan, the property matters most, not your salary. If the rent covers what it costs to hold the property each month, that is the starting point.

Who it’s for

  • Investors buying to rent, long term or short term.
  • Self-employed people whose tax returns don’t show everything they earn.
  • Investors with several properties who want to keep growing without relying on their personal income.
  • Buyers who want to hold the property in an LLC, when the program allows it.

Who it’s not for

  • The home you will live in. Other programs cover that.
  • Properties whose rent doesn’t cover their monthly cost, unless the program accepts other conditions.

How it works

What DSCR measures

DSCR stands for debt service coverage ratio. It divides the property’s monthly rent by its monthly cost: principal and interest, taxes, insurance and the association fee (HOA). That monthly cost is called PITIA.

If the result is above 1, the rent covers the cost. If it’s below 1, it falls short.

How it differs from a traditional loan

With a traditional loan, the lender reviews your personal income: W-2 forms, tax returns and pay stubs. With a DSCR loan, the main thing is the property and the rent it produces, or could produce according to the appraisal.

What the lender reviews

  • The rent. The current lease or the market rent the appraiser estimates.
  • The property. Its type, its condition and, for a condo, the building too.
  • Your credit and reserves. Even though your salary isn’t used, your credit history is reviewed, along with the money you’ll have left after closing.

The minimum DSCR, down payment, reserves and other requirements vary by program and investor.

Run the numbers

The property
The loan
Your expense assumptions

This is an illustration using the numbers you entered. It is not an offer, a quote or an approval. The rate, the costs and whether a loan fits depend on your profile, the property and the program.

Fill in every field to see the result.

DSCR compares the rent with the property’s monthly cost. Above 1, the rent covers the cost; below 1, it falls short. The minimum each program requires varies.

Documents usually requested

  • Valid ID.
  • Lease agreement, if the property is already rented.
  • Bank statements showing the funds for the down payment, closing costs and reserves.
  • LLC documents if you buy through one (articles of organization, operating agreement, EIN).
  • Property insurance quote.

Your advisor confirms the exact list for the program.

Frequently asked questions

Do I have to show my tax returns?

In DSCR programs the income that counts is the property’s, so your personal returns are usually not used to qualify. Your advisor confirms what the program that fits your case requires.

What if the property isn’t rented yet?

The market rent the appraiser estimates in the appraisal can be used. That’s why it helps to know, before making an offer, what similar properties in the area rent for.

Can I buy through an LLC?

Many DSCR programs allow it. It depends on the program and the investor funding the loan.

What if the DSCR comes out below 1?

It means the rent doesn’t cover the monthly cost. Each program sets its own minimum. There may be options with a larger down payment or other conditions, or this may not be the right loan for that property.

Does it work for short-term rentals like Airbnb?

Some programs accept short-term rental income and calculate it their own way. Ask about that option before choosing the property.

Can I apply from another country?

There are programs for foreign buyers that also qualify on rent. They have their own document and reserve requirements.

Next step

Check your case with a few questions, or talk to an advisor.

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