Question 1

What is a DSCR loan and who should use one?

Accepted Answer

DSCR stands for debt-service coverage ratio. It's a loan for investment properties where the property's monthly rent is the primary income source. Use it when you're buying a rental and your W-2 income doesn't support the loan amount.

Question 2

What's the minimum DSCR ratio lenders accept?

Accepted Answer

Standard DSCR is 1.25 — the monthly rent must be 125% of the monthly payment. Some lenders offer 1.0 DSCR or no-ratio programs for borrowers with strong reserves and excellent credit. Call for your lender's specific floor.

Question 3

Do I need 20% down on a DSCR loan?

Accepted Answer

Most DSCR lenders require 20–25% down. Some no-ratio programs accept 15% down if you have six months or more in reserves. The exact minimum depends on your credit, the property's cash flow, and your lender's overlays.

Question 4

How do lenders verify the property's rental income?

Accepted Answer

Lenders ask for a signed lease or rent roll. Bank statements showing deposits confirm actual cash flow. Tax returns showing rental income on Schedule E are helpful but not always required on DSCR loans.

Question 5

Can I use DSCR to buy a home I'll live in?

Accepted Answer

No. DSCR loans are for investment properties only. If you're buying a primary residence, use a conventional, FHA, or VA loan instead. DSCR underwriting assumes the property will be rented out.

DSCR Loans for Eureka Investors: Qualify on Rental Income, Not Personal W-2s