DSCR loans for investors
DSCR loans: finance a rental on its rent.
A loan on a rental property qualified on the property’s own rent instead of your personal income. No tax returns or pay stubs; credit, assets and the appraisal are still checked. For business purposes only.
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- Direct, licensed mortgage lender
- NMLS #103098
- Equal Housing Lender
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Fidelity Residential · NMLS #103098 · Equal Housing Lender
- Direct, licensed lenderNMLS #103098. Check our licences on NMLS Consumer Access.
- The rent does the workNo tax returns or pay stubs for the income.
- One unit to small buildingsHouses, condos, two to ten units and mixed use.
- A licensed loan officerA real person compares programs for your property.
The basics
How a DSCR loan works
DSCR stands for debt service coverage ratio. The lender compares the property’s monthly rent with its full monthly payment: principal, interest, property taxes, insurance and any association dues. That comparison, the ratio, takes the place of your personal income.
No tax returns, pay stubs or debt-to-income ratio are used. Your credit, your record of housing payments, the money for the down payment and reserves, and the appraisal are still checked.
It is a business-purpose loan for landlords and investors buying or refinancing a property nobody on the loan will live in. You can hold title in your own name or in a company, such as a limited liability company, with the owners giving a personal guarantee.
How the ratio reads
- Above one: the rent covers the payment with room to spare
- At one: the rent just covers the payment
- Below one: the rent falls short of the payment; fewer programs fit
Calculator
DSCR calculator
Enter the rent and the property’s monthly costs, including taxes, insurance and HOA dues, to see the debt service coverage ratio a lender would calculate. Use the interest rate from your own quote.
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Rent
Total for all units. Leave blank if the property is vacant.
The appraiser’s rent schedule. Lenders usually use the lower of the two.
The loan
From your own quote. This page does not state a rate.
Property costs
Leave blank if none.
Leave blank if none.
When every answer is in, see your result.
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Your result
| Principal and interest | – |
|---|---|
| Property taxes | – |
| Insurance | – |
| HOA dues | – |
| Total monthly payment (PITIA) | – |
| Largest loan at a ratio of 1.00 | – |
|---|---|
| Largest loan at a ratio of 1.25 | – |
| Largest loan at 1.00 where the lease counts only to 125% of market rent | – |
| Rent needed for a ratio of 1.00 | – |
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This calculator gives estimates for information only. It is not a loan application, an approval, a rate quote or a commitment to lend. The interest rate is the one you enter. Lenders set the qualifying rent from the lease and the appraisal; a lease above market rent counts only at programs that allow it, with proof of receipt, and some limit it to 115% or 125% of market rent. Each program has its own minimum ratio, loan-to-value, credit and reserve rules; most qualify an interest-only loan on the interest-only payment, and some do not. DSCR loans are for investment property only and are not available for a home you live in.
Properties
Rentals a DSCR loan can finance
Each program sets its own rules for the property. These are the main kinds we finance.
Houses, townhouses and condos
A single home let to a tenant on a lease, or one you are buying to rent out. The rent is taken from the lease and the appraiser’s rent schedule.
Two to four units
The rent of every unit counts toward the ratio. Nobody on the loan may live in any of the units.
Five to ten units and mixed use
Residential buildings of five to ten units, and small buildings with homes and a shop or office, based on the building’s rent. These are valued like small commercial property, so the appraisal and the reserves ask for more, and the programs want an experienced landlord.
Loans for larger rentalsShort-term rentals
A house, condo or two to four units let through a booking platform. Programs count this income differently from a lease: on a refinance they look at your booking history, and the most you can borrow against the value is usually lower. The property must be allowed to be let short-term where local rules require it.
Buy, refinance or take cash out
Buy a rental, refinance to change the loan, or take cash out of a rental you own. Fixed rates, interest-only periods and adjustable options exist in different programs.
How a cash-out refinance worksFrom a short-term loan to a rental loan
If you bought and renovated with a fix and flip loan and decide to keep the property, a DSCR loan can replace the short-term loan once the property is rented.
Fix and flip loans
Underwriting
What the lender still looks at
The rent replaces your income, not the rest of the file. The qualifying rent is generally the lower of the lease and the appraiser’s market rent; some programs count a higher lease when you can show it has been paid.
The ratio, your credit, the loan size, the property and whether it is a purchase or a refinance together set how much you can borrow against the value. A short-term rental, a vacant property or some condominiums can lower it.
Still checked
- Credit for each borrower or guarantor, and your recent mortgage or rent payments
- Assets for the down payment, closing costs and reserves
- The appraisal, with a rent schedule
- Landlord experience, where the program asks for it
How it works
The steps to a DSCR loan
Tell us about the property
The address, the units, whether it is rented or vacant, how you will hold title, and whether you are buying, refinancing or taking cash out. No income documents.
Credit and assets
We check credit for each borrower or guarantor, and you send statements for the down payment, closing costs and reserves.
Appraisal and the ratio
The appraiser values the property and reports market rent. We work out the ratio from the qualifying rent and the full monthly payment.
Sign and close
You sign a statement that the loan is for business purposes and that nobody on the loan will live in the property, and a personal guarantee if a company holds title. Then underwriting, title, insurance and closing.
Documents
What documents you need
No tax returns or pay stubs. Most investors can start with these.
- Bank or investment statements for the down payment, closing costs and reserves
- The current lease on a refinance, or the booking history for a short-term rental
- Your purchase contract, when you are buying
- Company documents if a company will hold title
- A list of the rentals you own, where the program asks about experience
- Photo identification for each borrower or guarantor
Questions
Common questions about DSCR loans
Can I live in a property I buy with a DSCR loan?
No. A DSCR loan is for investment property only. Nobody on the loan may live in the property, even part of the year, and you sign a statement saying so.
Do you need my tax returns?
No. The property’s rent takes the place of your income. Your credit, your assets and the appraisal are still checked.
Can a company hold title?
Yes. Title can be in your own name or in a company such as a limited liability company. The owners give a personal guarantee.
What if the property is vacant?
On a purchase or a vacant property, the appraiser’s market rent is used. Some programs lower how much you can borrow on a vacant property.
Can I put several rentals in one loan?
For experienced investors, some programs finance several rental homes in the same state under one loan, based on their combined rent. A property can be released from the loan when you sell it, on terms set in the loan. Loans for larger rentals and portfolios
Is there a prepayment penalty?
Many DSCR loans have a prepayment penalty in the first years, where the law allows one, and options without one exist. Your loan officer explains the choices before you decide.
Does the calculator on this page decide my loan?
No. It shows the ratio a lender would work out from the numbers you enter. The appraisal, the lease, your credit and the program’s own rules decide the loan.
Have a property in mind?
Get a quote, apply online, or talk the deal through with a licensed loan officer.
This page is general information, not a commitment to lend. Programs, terms and eligibility depend on credit, property, rent and underwriting review and are subject to change without notice. Business purpose investor loans are for investment property only.