DSCR Loans Explained

A DSCR (Debt Service Coverage Ratio) loan qualifies based on the property's rental income rather than the borrower's personal income. This makes them the primary refinance vehicle for BRRRR investors, especially those with multiple investment properties or self-employment income that is difficult to document for conventional lenders.

How DSCR Is Calculated

DSCR = Net Operating Income (NOI) ÷ Annual Debt Service

  • NOI: Annual rental income minus operating expenses (vacancy, management, taxes, insurance, maintenance, CapEx reserves)
  • Annual Debt Service: 12 monthly mortgage payments (principal + interest)

A DSCR of 1.0 means the property exactly breaks even — income covers the mortgage and nothing more. Above 1.0 means positive cash flow. Below 1.0 means the property loses money monthly.

Lender Requirements

  • Minimum DSCR: Most lenders require 1.0. Best rates at 1.25+. Some will go to 0.75 with higher rates and lower LTV.
  • LTV: Typically 70-80%. 75% is the standard for investment property.
  • Credit score: Usually 680+ minimum. 720+ for best rates.
  • Seasoning: 0-6 months depending on lender. Some have no seasoning requirement.
  • Property types: SFR, 2-4 unit, condos, townhomes. Some do 5-8 unit.
  • Loan size: Typically $75,000 minimum up to $2-3M.

DSCR Loan Rates (2026)

DSCR loan rates typically run 0.5-1.5% higher than conventional investment property rates. As of mid-2026, expect:

  • DSCR 1.25+, 75% LTV, 720+ credit: 6.5-7.5%
  • DSCR 1.0-1.25, 75% LTV, 700+ credit: 7.0-8.0%
  • DSCR below 1.0 (where available): 8.0-9.5%

Rates vary significantly by lender. Shopping 3-5 lenders is worth the time — a 0.5% rate difference on a $150,000 loan changes your monthly payment by ~$45 and your annual cash flow by ~$540.

Why BRRRR Investors Use DSCR Loans

  1. No personal income documentation. Self-employed investors, W-2 investors with 10+ properties, and those with complex tax returns avoid the documentation burden.
  2. Scalability. Conventional loans cap at 10 financed properties. DSCR lenders often have no property count limit.
  3. Speed. Underwriting is simpler. Many DSCR loans close in 2-3 weeks vs 30-45 days for conventional.
  4. Flexible seasoning. Some DSCR lenders have no seasoning requirement, allowing faster capital recycling.
Check Your DSCR

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