Investment Property Financing Based on the Property's Cash Flow
DSCR financing offers real estate investors another way to qualify for eligible rental-property financing by focusing on the property's qualifying rental income rather than traditional personal-income documentation.
Explore DSCR Options How DSCR WorksWhat Is a DSCR Loan?
DSCR stands for Debt Service Coverage Ratio. In many residential DSCR programs, the lender compares qualifying monthly rental income with the property's monthly housing obligation. The borrower, property, credit, reserves, appraisal and other factors still must meet applicable program guidelines.
Property Cash Flow
Qualification focuses primarily on qualifying rental income from the investment property rather than a traditional personal debt-to-income calculation.
Built for Investors
DSCR financing is designed for eligible non-owner-occupied investment properties and can provide another path for investors whose finances do not fit a conventional income approach.
Purchase or Refinance
Depending on the program and scenario, DSCR financing may be considered for an investment-property purchase, rate-and-term refinance or cash-out refinance.
DSCR, Without the Jargon
Here's a simple illustration using a common residential DSCR calculation. Exact calculations and qualifying income can vary by lender and program.
Illustrative qualifying rent:
$3,000/month
Illustrative monthly PITIA:
$2,400/month
In this example, the qualifying rent is 125% of the monthly PITIA. A higher or lower ratio does not by itself determine approval; underwriting requirements vary.
Financing That Speaks an Investor's Language
Real estate investors may have income, deductions and multiple properties that do not fit neatly into a traditional mortgage-income calculation. DSCR financing evaluates an investment property through a different lens.
Designed around eligible investment properties.
May reduce reliance on traditional employment-income documents.
Can be useful to investors building or managing rental holdings.
We review the property and your goals against available program guidelines.
Could a DSCR Loan Fit Your Investment?
A DSCR loan is not automatically the right solution for every investor or every property. The useful question is whether the property, financing goal and available program guidelines line up.
Buying a Rental?
Explore financing for an eligible investment-property purchase using a cash-flow-based qualification approach.
Refinancing?
Review whether a rate-and-term or cash-out DSCR refinance may fit your investment strategy.
Growing a Portfolio?
Talk through the property and your broader investment goals rather than trying to force the scenario into a one-size-fits-all loan.
Program availability, property eligibility, qualifying income methodology, credit, LTV, reserves, loan amounts, pricing and other requirements vary by lender and program. Not all borrowers or properties will qualify.
Common DSCR Questions
Does a DSCR loan mean my personal finances do not matter at all?
No. The property's qualifying rental income is central to DSCR underwriting, but lenders may still evaluate credit, assets, reserves, property eligibility, appraisal results and other requirements.
What does a 1.00 DSCR mean?
Under a gross-rent-to-PITIA calculation, 1.00 means qualifying monthly rent equals the monthly PITIA used in the calculation. Program requirements vary, and some lenders use different qualifying methods.
Can DSCR financing be used for a primary residence?
DSCR programs are generally designed for non-owner-occupied investment properties, not a borrower's primary residence.
Can I use DSCR financing for a refinance?
Potentially. Purchase, rate-and-term refinance and cash-out refinance options may be available depending on the lender, property and complete loan scenario.
Let's Look at the Property, Not Just the Paperwork.
Tell us about the investment property and what you're trying to accomplish. We'll review available financing options and explain which program guidelines may apply.
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