DSCR Defined in One Sentence
A Debt-Service Coverage Ratio (DSCR) loan is a real-estate mortgage that gets approved (or denied) primarily on the property’s own cash flow—not on your W-2 income or tax returns.
How Lenders Use the Ratio
- Calculate Net Operating Income (NOI)
Gross rents minus operating expenses. - Add Up Annual Debt Service
Twelve months of principal + interest (plus escrow if rolled in). - Divide NOI by Debt ServiceNOI ÷ Debt Service=DSCRNOI÷Debt Service=DSCR
- If the result is ≥ 1.20× (some go as low as 1.00×), the deal usually passes.
Why Investors Love DSCR Loans
| Benefit | Why It Matters |
|---|---|
| No Tax Returns Needed | Perfect for self-employed and full-time investors |
| Close in LLC or Corp | Keeps liability off your personal balance sheet |
| 30-Year Fixed or ARM | True long-term, set-and-forget financing |
| Scale Past “10-Loan” Limit | Not capped like conventional investor loans |
Ideal Properties
- Turnkey rentals (single-family, duplex, 4-plex)
- Short-term rentals with proven income
- Light cosmetic rehabs destined for BRRRR
(Heavy rehabs? Use hard money first, then refinance into a DSCR loan.)
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Let’s get your next deal funded—the smart way.
– Ken Guzman, Mortgage Advisor NMLS1287517