A DSCR loan (Debt Service Coverage Ratio loan) is a business-purpose mortgage for eligible investment properties where qualification may be based primarily on property cash flow. Borrower, property, entity, appraisal, reserve, documentation, and underwriting requirements vary by lender and program.
DSCR Formula
DSCR = Net Operating Income (NOI) ÷ Annual Debt Service
NOI: Gross rental income minus operating expenses
Annual Debt: Total yearly loan payments
DSCR requirements vary by lender, property type, rental strategy, loan structure, and program guidelines. Lenders may also consider reserves, leverage, documentation, appraisal, and other underwriting factors when evaluating a DSCR loan scenario.
Let’s say a property has:
DSCR = 48,000 ÷ 42,000 = 1.14
This example is for educational purposes only. DSCR calculation methods and how the ratio is evaluated vary by lender and program. Borrower, property, entity, appraisal, reserve, documentation, and underwriting requirements may also apply. A DSCR calculation does not by itself indicate loan qualification or approval.
Single-family homes must be used strictly as investment properties.
Available DSCR loan structures and repayment terms vary by lender, property, borrower, and program guidelines.
If the DSCR does not initially meet lender guidelines, possible strategies include:
Each scenario is reviewed individually to explore available structures based on property, borrower, lender, and program requirements.
3 Simple Steps to Start Your Mortgage Review
We begin with a conversation to understand your home financing goals and general mortgage needs.
We review mortgage options based on your goals, property type, occupancy, documentation profile, and applicable lender guidelines.
Submit a secure application to begin the mortgage review process. Any preapproval requires applicable documentation and underwriting review.
