What DSCR actually means
DSCR stands for Debt Service Coverage Ratio. It's the ratio of the property's monthly rental income to its total monthly mortgage payment (PITI). A DSCR of 1.0 means the rent exactly covers the payment. Lenders typically want 1.0–1.25 or higher.
How it's different from a conventional loan
Conventional and FHA loans look at your personal income, tax returns, W-2s, DTI, and job history. DSCR loans skip almost all of that. The property qualifies itself. That means no income docs, no DTI calculation, and no cap on how many financed properties you own.
Typical DSCR terms
- Down payment: 20–25% on purchase, 25%+ on cash-out
- Credit score: 660+ usually (best pricing at 740+)
- Loan amounts: $100K to $3M+
- Property types: 1–4 unit residential, condos, short-term rentals
- Closes in the name of an LLC — great for asset protection
When DSCR is the right tool
- You're self-employed and your tax returns show low taxable income
- You already have 4–10 financed properties and conventional caps you out
- You want to close in an LLC for liability separation
- You're buying a short-term rental and need projected income to qualify
Where it costs more
DSCR rates run roughly 0.75–1.5% above conventional, and origination fees are higher. The trade-off is speed, scalability, and the ability to keep buying. For active investors, that's usually worth it.
A simple example
A $400K rental priced at $2,950/mo PITI that rents for $3,400/mo has a DSCR of 1.15 — comfortably above the typical 1.0 minimum. The lender approves the loan based on that ratio, period. Your day job, your tax write-offs, your other properties — none of it gets in the way.