Debt service coverage ratio loans let investors qualify based on a rental property's income instead of their personal W-2 or tax-return income.
How they work
Lenders divide the property's rent by its principal, interest, taxes and insurance payment. A DSCR of 1.0 means rent exactly covers the payment; many lenders want 1.1 to 1.25 or higher.
Typical terms
Down payments are usually 20%–25% or more, rates are often higher than conventional loans, and prepayment penalties are common. These loans are useful for self-employed investors or those near conventional loan limits.
Is it right for you?
Compare against conventional financing. If your income documents well, conventional loans are cheaper. Use a DSCR loan when you need speed, flexibility or exceed conventional property count limits, and confirm the full costs.
Try the numbers
Use our DSCR Calculator to see this in practice. With its default example (Annual NOI: $42,000; Loan amount: $380,000; Interest rate: 7%), it shows dscr: 1.38×. Adjust the inputs to match your situation.
Key takeaways
- DSCR loans qualify on property income.
- Expect higher rates and larger down payments.
- Compare with conventional loans first.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.