The simple definition
DSCR (Debt Service Coverage Ratio) is a rental property loan product where the lender underwrites the deal based on whether rent covers the mortgage payment — rather than on your personal income.
The DSCR formula
DSCR = Gross Monthly Rent / Monthly PITIA
PITIA = Principal + Interest + Taxes + Insurance + Association dues
A DSCR of 1.0 means rent exactly covers debt service. 1.25 means rent is 25% above debt service. 1.5+ is considered strong.
Typical DSCR loan terms
- Rates: 7.5–10.5%
- Loan-to-value: up to 80% for purchase, 75% for cash-out refi
- Term: 30-year amortization, often with 5/1, 7/1, or 10/1 ARM
- DSCR minimum: 1.0 (some lenders accept 0.75-0.99 with premiums)
- FICO minimum: 620-680 typical
- Down payment: 20-25% (30-50% for foreign nationals)
- LLC vesting: required or strongly preferred
- Prepayment penalties: 3-5 year structures common
When DSCR makes sense
- Self-employed investors with hard-to-document income
- LLC vesting strongly preferred or required
- Past Fannie Mae 10-property limit on conventional investor loans
- Need fast underwriting without tax returns or income docs
- Investor-only acquisition (not owner-occupied)
- Foreign nationals acquiring US rental property
- Short-term rental (Airbnb / VRBO) financing
DSCR FAQ
DSCR stands for Debt Service Coverage Ratio. It measures whether the property's rent covers the mortgage payment. DSCR = Gross Monthly Rent / Monthly PITIA (Principal + Interest + Taxes + Insurance + Association dues).
1.0 — meaning rent equals debt service. Best pricing typically requires 1.25+. Some lenders accept 0.75-0.99 with rate premiums and higher down payments.
Conventional underwrites borrower income (DTI). DSCR underwrites property cash flow. No tax returns, no W-2s, no income verification.
7.5–10.5% currently, depending on leverage, DSCR ratio, borrower experience, and prepayment structure.
Yes — most DSCR lenders require or strongly prefer LLC vesting. This maintains business-purpose loan classification.
No. DSCR Loan Program is an independent directory. We connect investors with vetted DSCR lenders.