What Is A DSCR Loan?
What Is a DSCR Loan?
A DSCR loan is a financing option built for real estate investors. It doesn’t rely on the borrower’s personal income to determine eligibility. Instead, lenders focus entirely on whether the property being financed can generate enough income to cover the loan payments.
The term DSCR stands for Debt Service Coverage Ratio. This ratio measures how much net rental income a property brings in compared to its monthly debt obligations. The higher the ratio, the better the cash flow, and the more likely a lender is to approve the loan.
Why Investors Use DSCR Loans:
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No personal income verification required
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Perfect for self-employed borrowers or LLCs
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Fast approvals with less paperwork
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Works for both short-term rentals (Airbnb) and long-term rentals
How DSCR Loans Work Work
For example, a property that earns $2,500 per month and has a $2,000 monthly mortgage payment would have a DSCR of 1.25. This means the property produces 25% more income than required to service the debt.
Most lenders set a minimum DSCR threshold of 1.0, though stronger ratios may be required depending on the loan terms, location, or risk profile.
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