DSCR Rental Loans

A DSCR loan (debt service coverage ratio loan) is a long-term mortgage for rental property where qualification rests on one question: does the property's rent cover the proposed payment? No W-2s, no tax returns, no debt-to-income ratio. For hard money borrowers it is the most common way to refinance a flip into a hold.

How DSCR is calculated

DSCR = gross monthly rent ÷ monthly PITIA (principal, interest, taxes, insurance and association dues). A property renting for $2,400 with a $2,000 PITIA has a DSCR of 1.20. Most lenders want 1.0 to 1.25 for best pricing; several will lend below 1.0 — even to 0.75 — at lower leverage and higher rates. Market rent is set by the appraiser's rent schedule (Form 1007), with the lease amount used if lower in some programs.

Run your numbers in the DSCR calculator.

Program features

• 30-year fixed, 5/6 and 7/6 ARMs, and 10-year interest-only options.
• Purchase, rate-and-term and cash-out refinance; portfolio loans covering 5 to 20+ properties on one note.
• Short-term rentals qualified on AirDNA-style projections at some lenders.
• Vesting in an LLC is allowed and usually preferred.
• Prepayment penalties are standard (3-2-1 or 5-4-3-2-1 step-downs) and can be bought out with points.

Using DSCR as the hard money exit

The sequence investors call BRRRR — buy, rehab, rent, refinance, repeat — is really a two-loan structure: a fix and flip loan for acquisition and construction, then a DSCR refinance at up to 75–80% of the new appraised value. Order your DSCR pre-qualification while the rehab is underway, confirm the lender's seasoning rule (many allow cash-out on new value after 3 to 6 months of ownership; some have none if rehab is documented), and keep your credit clean during the project.

Frequently asked questions

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