DSCR Loan

A DSCR loan (Debt Service Coverage Ratio loan) is a type of mortgage designed for people buying rental properties, whether short-term (like Airbnb) or long-term (like traditional rentals). Instead of using your personal income or job history to qualify, the lender looks at how much rental income the property is expected to make.

The DSCR is a number that shows if the property’s income can cover the loan payments. It’s calculated by dividing the property’s income (after expenses) by the loan payment. If the number is 1 or higher, it means the property earns enough to pay the mortgage.

❌ Not Required for DSCR Loans:

  • Personal income verification
    (No pay stubs, W-2s, or tax returns needed)

  • Employment history or job verification

  • Debt-to-Income (DTI) ratio calculations

  • Personal income documentation from self-employment

  • Primary residence occupancy
    (These loans are for investment properties only)

  • Traditional underwriting guidelines
    (Fannie Mae/Freddie Mac rules don’t apply)

✅ Instead, DSCR Loans Focus On:

  • The property’s rental income

  • The Debt Service Coverage Ratio (DSCR), calculated as:
    Net Operating Income ÷ Mortgage Payment

📌 General Information: DSCR Loans (Debt Service Coverage Ratio Loans)

  • ✅ Used for investment properties only – long-term or short-term rentals (e.g., Airbnb, VRBO, rental homes)

  • ✅ No personal income documentation required – no W-2s, pay stubs, or tax returns

  • ✅ No employment or job verification

  • ✅ Qualification is based on the property’s cash flow, not the borrower’s personal income

  • ✅ DSCR (Debt Service Coverage Ratio) measures how well the property’s rental income covers the loan payment

  • ✅ DSCR = Net Operating Income ÷ Debt Payment

  • ✅ A DSCR of 1.0 or higher typically means the property earns enough to cover its mortgage

  • ✅ Great option for self-employed investors, LLCs, or those with complex finances

  • ✅ Can be used for purchase or refinance

  • ✅ Available for 1–4 unit residential properties, including condos and townhomes

  • ✅ Loan amounts typically start around $100,000 or more

  • ✅ Credit score requirements vary – usually 660+

  • ✅ Interest rates may be slightly higher than traditional loans, but offer flexibility

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