Ralo
Sign UpLogin

DSCR Loan

A DSCR loan is a mortgage for an investment property that qualifies on the property rather than on your personal income. The lender compares the rent the property earns with its full monthly housing payment: the debt service coverage ratio.

Get Your DSCR Rate

Key Features

  • ✓Qualifies on rental income from the property, not on tax returns or pay stubs
  • ✓For investment properties only, not a home you live in
  • ✓Can close in the name of an LLC with many lenders
  • ✓Not sold to Fannie Mae or Freddie Mac, so each lender sets its own terms
  • ✓Prepayment penalties are common and negotiable

Who Is a DSCR Loan a Good Fit For?

  • Investors whose tax returns understate their real cash flow
  • Self-employed borrowers buying rental property
  • Investors who already hold several financed properties
  • Buyers who want the loan in a business entity

Requirements

Credit Score

Set by each lender; higher scores price better and allow more leverage.

Down Payment

Set by each lender, and larger than on a primary-residence loan.

Debt-to-Income

Not used. The lender divides the property’s rent by its monthly principal, interest, taxes, insurance and association dues.

Pros and Cons

Advantages

  • +No personal income documentation
  • +No limit tied to the number of properties you already finance
  • +Faster to document than a full-income investment loan
  • +Entity ownership is possible

Considerations

  • -Rates are higher than on conventional investment-property loans
  • -Larger down payment and cash reserves
  • -Prepayment penalties are common
  • -Terms vary widely between lenders, so comparison matters more

The Questions Everyone Asks

Related Resources

Compare Options

DSCR vs Conventional→

Explore Other Loan Types

Conventional

A conventional mortgage is a home loan that is not backed by a government agency. It is the most com...

Jumbo

A jumbo loan is a mortgage that is larger than the conforming limit set each year. It is common in h...

ARM

An adjustable-rate mortgage starts with a lower initial rate for a set period, then adjusts on a sch...

FHA

An FHA loan is a mortgage insured by the Federal Housing Administration. The insurance lets approved...

Bank Statement

A bank statement loan is a mortgage that documents income with 12 to 24 months of bank deposits inst...

HELOC

A home equity line of credit is a revolving credit line secured by your home. You borrow what you ne...

Ready to Get Your DSCR Rate?

Mortgage pricing is opaque. Compare rate, points, and fees side by side so you can see the real cost. Ralo shows every line item so you can compare mortgage options more clearly.

Compare Rates Now