A DSCR (Debt Service Coverage Ratio) loan allows real estate investors to qualify for financing based on the income a property generates — not on personal income, tax returns, or employment history. This makes DSCR loans one of the most flexible and accessible options for investors looking to scale a rental portfolio, acquire new properties, or refinance existing holdings.
At IH Lending, we work with investors at every level — from first-time landlords to experienced portfolio holders — to structure DSCR financing that aligns with their investment strategy.
Instead of evaluating your W-2 income or personal debt-to-income ratio, DSCR lenders look at the property’s ability to cover its own debt obligation. The key metric is the Debt Service Coverage Ratio — calculated by dividing the property’s gross rental income by its total monthly debt payment (principal, interest, taxes, insurance, and any HOA dues).
A DSCR of 1.0 means the property’s income exactly covers its debt. Most programs look for a DSCR of 1.0 or higher, though some options are available for ratios slightly below 1.0 depending on compensating factors such as credit score, reserves, or loan-to-value ratio.
While requirements vary by lender and program, the following guidelines represent common thresholds for DSCR investment property loans. Meeting these criteria positions you for competitive rates and terms.
Conventional loans evaluate the borrower’s personal income and require full documentation — tax returns, pay stubs, and employment verification. This works well for salaried borrowers with straightforward finances, but can be limiting for self-employed investors or those with significant write-offs.
DSCR loans shift the focus to the property itself. If the rental income supports the debt, the borrower’s personal income is not a factor. This makes DSCR programs especially valuable for scaling beyond the conventional 10-financed-property limit, purchasing through an LLC, or avoiding the documentation burden of traditional underwriting.
Trade-offs to consider: DSCR loans generally carry slightly higher interest rates than conventional options, and they require a larger down payment. Your loan officer can help you evaluate which path offers the best overall return based on your investment goals.
A DSCR loan is a type of investment property mortgage where qualification is based on the property’s rental income rather than the borrower’s personal income. The lender calculates the Debt Service Coverage Ratio — the property’s gross rental income divided by its total monthly debt payment — to determine whether the property can support the loan.
No. One of the primary advantages of a DSCR loan is that it does not require personal income documentation. There are no tax returns, W-2s, pay stubs, or employer verification involved in the qualification process. This makes DSCR programs particularly attractive to self-employed investors.
Yes. Many DSCR programs accept short-term rental income, either from documented booking history (such as Airbnb or VRBO earnings) or from projected market rent estimates provided by a licensed appraiser. Program availability depends on the lender and the property’s location.
Yes. DSCR loans are commonly closed in the name of an LLC or other business entity. Many investors prefer this structure for liability protection and to keep investment debt separate from personal finances. The individual members of the LLC will typically still need to personally guarantee the loan.
Most programs require a minimum DSCR of 1.0, meaning the property’s rental income at least covers the full monthly payment. Some programs allow ratios as low as 0.75 with compensating factors such as a higher credit score, larger down payment, or additional reserves. Your loan officer can help determine which programs fit your property’s cash flow profile.
Unlike conventional loans, which are generally capped at 10 financed properties per borrower, DSCR programs typically have no set limit on the number of loans you can carry simultaneously. Qualification is evaluated on a property-by-property basis, making DSCR an ideal tool for investors building or expanding a portfolio.
Whether you’re acquiring your first rental property or adding to an existing portfolio, IH Lending can help you structure DSCR financing that works for your investment strategy. Get in touch to discuss your scenario, or start your pre-qualification online.
