Financing6 min read
DSCR Loans: The Investor's Guide to Qualification
2026-03-05
DSCR stands for Debt Service Coverage Ratio. A DSCR loan qualifies you based on the property's ability to cover its own debt payments — not your personal W-2 income.
How DSCR Is Calculated
DSCR = Net Operating Income (NOI) / Annual Debt Service
If your NOI is $18,000/year and your annual mortgage payments are $14,400, your DSCR is 1.25.
What DSCR Do Lenders Require?
- 1.0 — The property breaks even on debt payments. Some lenders accept this.
- 1.20-1.25 — Most common minimum requirement. Lenders want a cushion.
- 1.50+ — Strong coverage. You'll get better rates and terms.
DSCR Loan Terms
Typical DSCR loan terms in 2026:
| Feature | Typical Range |
|---|---|
| Down payment | 20-25% |
| Interest rate | 7.0-8.5% |
| Loan term | 30 years |
| Min DSCR | 1.0-1.25 |
| Min credit score | 660-680 |
When to Use a DSCR Loan
DSCR loans are ideal when: - You're self-employed or have complex income - You already own 5-10+ financed properties - You want to scale fast without income documentation - The property cash flows well on its own
The Catch
Higher rates. DSCR loans typically run 0.5-1.5% higher than conventional. Run the numbers through a deal analyzer to see if the math still works.