What a DSCR loan is
A DSCR loan — short for debt service coverage ratio — is a mortgage for investment property that qualifies on what the property earns. Instead of asking for your W-2s, pay stubs and tax returns, the lender asks a simpler question: does the rent cover the cost of owning the property?
That makes it the loan of choice for investors whose tax returns do not tell the whole story — business owners with write-offs, investors with a growing portfolio, and anyone who would rather each property stand on its own.
How the ratio works
The lender divides the property's monthly rent by its full monthly housing cost — principal, interest, taxes, insurance and any HOA dues. A ratio of 1.00 means the rent covers the cost exactly; above 1.00, the property has cushion. The stronger the ratio, the more room you generally have on loan amount and pricing.
Which rent counts is just as important as the formula: usually the lower of the lease or the appraiser's market rent estimate, and documented booking history or a rent analysis for short-term rentals.
What you can do with it
- Buy a rental property — single-family, 2–4 units, condos and townhomes.
- Refinance to a better rate or structure.
- Take cash out — on select programs, with no minimum ownership period.
- Borrow against the equity with a DSCR home equity loan, leaving your first mortgage untouched.
- Finance long-term and short-term rentals.
- Close in your personal name, your LLC, or with title held in a revocable trust.
Cash-out with no waiting period
Most lenders make you wait six to twelve months after buying before you can refinance and take cash out. We have access to DSCR programs with no minimum ownership period. If you have owned the property for less than six months, the loan is based on the lower of the appraised value or your purchase price plus documented improvements — so if you bought, renovated and kept your receipts, you do not have to sit on your capital waiting for the calendar.
A home equity loan on your rental
If your first mortgage has a rate worth keeping, refinancing all of it to reach the equity can be the expensive way to do it. A DSCR home equity loan is a fixed-rate second mortgage on the investment property, qualified on its cash flow. The first mortgage stays exactly where it is.
What the lender still looks at
Skipping the income documents does not mean skipping underwriting. Credit, cash reserves after closing, the property's condition and value, and your experience as an investor all shape what a lender will offer. We look at all of it before anything is submitted, so the structure we propose is one that will actually close.
Prepayment penalties
Most DSCR loans carry a prepayment penalty — a fee if you pay the loan off within the first few years. It is not a trap; it is part of how these loans are priced, and a longer penalty period generally buys a better rate. If you might sell or refinance soon, we will price a shorter period, or none where available, and show you the trade-off in plain numbers before you choose.
Where we lend
DSCR loans are business-purpose loans, and we can arrange them in most states. A handful of states require additional licensing even for business-purpose lending — tell us where the property is and we will confirm before you spend a dollar.
Every file is different. Guidelines, pricing and eligibility vary by lender and are subject to credit approval and property eligibility — we’ll walk you through exactly what applies to yours.