DSCR Loans

How DSCR Loans Work

At NEXA Mortgage, we specialize in helping real estate investors secure financing through Debt Service Coverage Ratio (DSCR) loans. Unlike traditional mortgage loans, DSCR loans focus on the income potential of the investment property rather than the borrower’s personal income. These loans are an excellent option for investors who want to expand their portfolio without the strict income verification required by conventional loans.

DSCR Loan Benefits

DSCR loans provide real estate investors with flexible and efficient financing. Below are the key benefits:

No Personal Income Verification – Instead of using your personal debt-to-income ratio (DTI), lenders evaluate the rental income of the property to qualify the loan.

No Tax Returns or W-2s Required – Ideal for self-employed investors or those who prefer not to provide extensive personal financial documentation.

Easier Approval for Investors – Since DSCR loans rely on the property’s cash flow, borrowers with multiple rental properties can qualify more easily.

Unlimited Properties Allowed – Unlike conventional loans that limit the number of financed properties, DSCR loans allow investors to scale their portfolios quickly.

Competitive Interest Rates – Interest rates are competitive compared to traditional investment property loans, with loan terms designed for investors.

Flexible Loan Terms – Options include fixed-rate and adjustable-rate mortgages (ARMs), with interest-only payment options available.

Can Be Used for Various Property Types – DSCR loans can finance single-family homes, multi-family properties (up to 4 units), condos, and short-term rentals (Airbnb/VRBO properties).

No Loan Limits – Unlike conventional loans, DSCR loans do not have conforming loan limits, making them ideal for high-value investment properties.

Cash-Out Refinancing Available – Investors can leverage their equity to reinvest in additional properties or improve their existing portfolio.

DSCR Loan Checklist

To apply for a DSCR loan, you will need to provide documentation that focuses on the rental income and value of the investment property:

Property Income & Financials

Lease agreement (if the property is currently rented)
Short-term rental income history (Airbnb/VRBO statements, if applicable)
Property appraisal (ordered by the lender to determine fair market value)
Debt Service Coverage Ratio (DSCR) calculation – Rental income ÷ Monthly loan payment

Borrower & Business Information

LLC or business entity documentation (if purchasing under an LLC)
Credit report (most lenders require a credit score of 620 or higher)
Down payment funds verification (bank statements showing liquid assets)

Personal Information

Driver's License or other official State identification.
Social Security Card.

DSCR Loan FAQ

Loan Qualifications & Requirements

What is a DSCR loan?

A DSCR loan is a real estate investment loan that qualifies borrowers based on a property’s cash flow (rental income) rather than personal income or employment history.

What is the minimum DSCR ratio required to qualify?

Most lenders require a DSCR of at least 1.0 to 1.25. A DSCR of 1.0 means the rental income covers the mortgage payment. Some programs allow below 1.0 DSCR with additional reserves or higher down payments.

How do I calculate DSCR?

DSCR is calculated as:

Gross Rental Income ÷ Monthly Mortgage Payment (PITIA)

Example: If a property generates $2,000/month in rent and the total mortgage payment (including principal, interest, taxes, insurance, and HOA fees) is $1,600/month, the DSCR is:$2,000 ÷ $1,600 = 1.25

What is the minimum credit score for a DSCR loan?

Most lenders require a 620+ credit score, but better terms are available with 680+.

Can I use projected rental income for qualification?

Yes! If the property is not currently rented, lenders may use a rent schedule (Form 1007) from the appraisal to estimate rental income.

Loan Terms & Property Guidelines

What types of properties qualify for DSCR loans?

Single-family homes

Multi-unit properties (up to 4 units)

Condos and townhomes

Short-term rental properties (Airbnb/VRBO)

Mixed-use properties (case-by-case basis)

Is there a loan limit for DSCR loans?

No. Unlike conventional loans, DSCR loans do not have maximum loan limits and can finance high-value investment properties.

Can I purchase a property under an LLC?

Yes! DSCR loans allow borrowers to purchase and hold properties under an LLC, which is beneficial for asset protection and tax purposes.

What is the typical down payment required?

20-25% down is common for DSCR loans

Lower down payments may be available with higher interest rates or reserves

Closing Costs & Refinancing

Are there prepayment penalties on DSCR loans?

Many DSCR loans have a prepayment penalty (typically 3-5 years) but may offer options to buy out the penalty for a fee.

Can I refinance an existing investment property with a DSCR loan?

Yes, cash-out refinancing is available, allowing investors to tap into their property’s equity to reinvest or improve cash flow.

How long does it take to close a DSCR loan?

DSCR loans typically close within 30-45 days, depending on appraisal and underwriting.

Do DSCR loans require reserves?

Some lenders require 3-12 months of reserves (mortgage payments set aside in savings).

Schedule Consultation Today!

The information provided on this website is for general informational purposes only and does not constitute financial, legal, or mortgage advice. Loan approval is subject to lender guidelines, credit approval, and property qualifications. Loan terms and DSCR calculations may vary by lender and are subject to change based on market conditions and borrower profile.

NEXA Mortgage does not provide legal or tax advice. Borrowers are encouraged to consult a licensed mortgage professional to discuss specific loan options and eligibility.

For the most up-to-date DSCR loan requirements, please contact NEXA Mortgage for a personalized consultation.