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DSCR FAQ     

How is DSCR Calculated?

The Debt Service Coverage Ratio is a simple formula used to determine the "health" of an investment. It is calculated as:

DSCR= Gross Monthly Rental Income divided by Monthly PITIA (Principal, Interest, Taxes, Insurance & Association fees)

Example: If your property generates $2,500 in monthly rent and the total mortgage payment is $2,000, your DSCR is 1.25. Since the ratio is above 1.0, the property is "cash-flow positive" and qualifies easily!

Is a DSCR Loan Right for You?

This product is the "Gold Standard" for:

  1. Self-Employed Investors who have significant tax write-offs.

  2. Investors Scaling Quickly who have reached their limit with Fannie Mae/Freddie Mac.

  3. Foreign Nationals looking to invest in U.S. real estate.

  4. Short-Term Rental Owners (Airbnb/VRBO) looking to leverage high-yield properties.

What exactly is a DSCR loan? A Debt Service Coverage Ratio (DSCR) loan is a type of "no-doc" or "low-doc" mortgage for real estate investors. Instead of using your personal income (W2s or tax returns) to qualify, the lender uses the rental income generated by the property to ensure it can cover the monthly debt obligations.

Do I need to be employed to get a DSCR loan? No. Because the loan is based on the property's cash flow, your personal employment status is not the primary factor. This makes it an ideal solution for full-time investors or self-employed individuals who may not show high "taxable" income.

Can I close in the name of an LLC? Yes! In fact, many investors prefer this for asset protection. At LoanHouse, we encourage and facilitate closings under an LLC, provided there is a personal guarantee from the primary members.

Qualification & Terms

What is a "good" DSCR ratio? Most lenders look for a ratio of 1.20 or higher, meaning the property generates 20% more income than the mortgage cost. However, we have programs available for ratios as low as 0.75, and even "no-ratio" programs for investors with strong credit and high equity.

Are interest rates higher for DSCR loans? Generally, yes. Because these loans carry more risk for the lender and require significantly less paperwork than a traditional mortgage, rates are typically 1% to 2% higher than standard conventional loans.

Is there a limit to how many DSCR loans I can have? Unlike conventional loans (which often cap you at 10 properties), there is typically no limit to the number of DSCR loans you can hold. This is why professional investors use them to scale their portfolios indefinitely.

The Process

What documents will I actually need to provide? While we don't need tax returns or pay stubs, we will generally require:

  • A valid ID.

  • A credit report.

  • Bank statements (to verify your down payment and reserves).

  • A rental lease agreement (or a "Market Rent" estimate from an appraiser).

Do DSCR loans have prepayment penalties? Most DSCR loans do include a prepayment penalty (often 1–5 years). However, many of our programs offer the flexibility to buy down or waive this penalty if you plan to flip or refinance the property in the near future.

How long does it take to close? Because we skip the intense personal financial underwriting, we can often close DSCR loans in 21 to 30 days, which is significantly faster than a traditional bank.

Property Types

Can I use a DSCR loan for a Short-Term Rental (Airbnb)? Yes! We are experts in STR financing. We can often use "AirDNA" data or the property’s historical short-term rental income to qualify the loan, rather than relying on lower long-term lease estimates.

Are fix-and-flip properties eligible? DSCR loans are intended for "buy and hold" strategies (long-term rentals). If you are looking for a short-term loan to renovate and sell a property, ask us about our Hard Money or Bridge Loan products.

DSCR Loans for Real Estate Investors | No Income Verification | Loanhse.com