DSCR Loan Requirements

Get insights on how lenders are underwriting DSCR loans for real estate investors.

What Are the Requirements for a DSCR Loan?

Debt Service Coverage Ratio (DSCR) loans have become a go-to financing option for real estate investors who want to qualify using rental income—not personal income. Whether you’re purchasing, refinancing, or pulling cash out on an investment property, DSCR loans offer flexibility and speed. But what exactly do you need to qualify?

Here’s a breakdown of the most common DSCR loan requirements:

✅ 1. Minimum DSCR Ratio

Lenders calculate your Debt Service Coverage Ratio by dividing the property's gross monthly income by its monthly debt obligations (PITI + HOA).

• Typical minimum: 1.00 (property breaks even)

• Stronger terms: Often offered for DSCR of 1.25 or higher

• Some programs allow <1.00 with compensating factors (e.g. larger down payment)

✅ 2. Property Type & Use

• Eligible: 1–4 unit residential properties, condos, townhomes, and some short-term rentals (Airbnb/Vrbo)

• Must be non-owner-occupied

• Property should be rent-ready or currently generating income

✅ 3. Down Payment & Loan-to-Value (LTV)

• Minimum down payment: 20–25%

• Maximum LTV: Usually 75–80% depending on DSCR, credit score, and property type

• Cash-out refinances often max out at 70–75% LTV

✅ 4. Credit Score Requirements

• Minimum credit score: 640

• Better terms are available with scores of 700+

• No major mortgage late payments or recent bankruptcies

✅ 5. Income Documentation (Simplified)

No W-2s, tax returns, or pay stubs required. Instead, lenders verify income using one of the following:

• Current lease agreement

• Short-term rental statements (Airbnb, Vrbo, etc.)

• Market rent analysis (1007) from an appraisal

✅ 6. Ownership & Entity Options

• Can close in personal name or LLC

• Title-holding trusts sometimes allowed

• DSCR loans are ideal for portfolio investors with multiple properties

✅ 7. Reserves & Other Requirements

• 3–6 months of reserves may be required, depending on LTV and credit

• Appraisal with market rent schedule (Form 1007) is usually needed

• Property insurance and taxes must be properly escrowed or verified

Final Word

DSCR loans are designed with real estate investors in mind. With less paperwork, easier qualification, and fast closings, they’re a great tool for scaling your portfolio. Just be sure to meet the key credit, income, and property guidelines—and let us guide you through the process.

Have a deal in mind? Reach out for a DSCR loan quote today and let’s see if the numbers work.