Five things decide whether your DSCR loan gets approved: the property's DSCR ratio, your credit score, how much you put down, the property type, and your cash reserves after closing. Miss on any one of them and the deal stalls. Nail all five and most lenders will hand you a term sheet without ever asking for a tax return.
DSCR stands for Debt Service Coverage Ratio, and it's the single metric that replaces traditional income documentation in this loan program. Instead of proving what you earn, you prove what the property earns. That's what makes DSCR loans the preferred tool for investors who own multiple rentals, are self-employed, or simply want a faster close.
Requirement 1: The DSCR Ratio
The ratio itself is the first gate. DSCR equals monthly gross rent divided by monthly PITIA (principal, interest, taxes, insurance, and any HOA dues). A ratio of 1.0 means the rent covers the payment exactly. Above 1.0, the property cash flows. Below 1.0, the investor covers the difference out of pocket each month.
Most lenders set a floor at 0.75, meaning they'll accept a property where the rent covers 75% of the mortgage obligation. But the pricing tiers reward higher ratios, and they reward them a lot.
Take a real deal. Say you're buying a single-family rental for $400,000 with 25% down. Your loan amount is $300,000. At a 7.25% rate on a 30-year fixed, your monthly principal and interest is roughly $2,047. Add $350 for taxes and $125 for insurance, and your total PITIA is $2,522. If the appraiser's market rent opinion comes in at $2,800, your DSCR is $2,800 / $2,522 = 1.11.
That 1.11 qualifies, but a property at 1.25 would get better pricing by 25 to 50 basis points. Push your down payment to 30% and the lower loan balance drops your PITIA, which lifts the ratio. The interplay between down payment and DSCR ratio is one of the most useful levers investors have.
| DSCR Ratio | Pricing Impact | What It Means |
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