Reviewed by Jeff Shin, NMLS #1041652. Updated .
What DSCR means
DSCR stands for debt service coverage ratio. On a rental property loan it compares the rent to the full housing payment:
DSCR = monthly rent ÷ monthly PITIA (principal, interest, property taxes, insurance, and any HOA dues).
A ratio of 1.00 means the rent exactly covers the payment. Above 1.00 the property cash-flows on paper; below 1.00 it does not. Lenders use the lease, or the appraiser’s market-rent estimate, as the rent figure.
Worked example. Market rent is $2,600 a month. Principal and interest, taxes, insurance, and HOA total $2,170. $2,600 ÷ $2,170 = a DSCR of about 1.20.
Illustrative example only, not a quote. Actual APR and terms vary.
Run your own numbers in the DSCR calculator, or read how to use a DSCR calculator before an offer.
What DSCR lenders look at
- The ratio. Many programs price best at 1.20 or higher. Some allow a ratio at or below 1.00 at a higher rate. Cutoffs vary by investor, which is why shopping one file across several DSCR lenders matters.
- Credit and down payment. Pricing moves in steps by credit score and loan-to-value.
- Reserves. Most programs want several months of payments in the bank after closing. See how many months of reserves a DSCR loan needs.
- Prepayment penalty. Common on DSCR loans and negotiable against rate. Read prepayment penalty checks before closing.
- Entity. DSCR loans are business-purpose loans and can usually close in an LLC. See closing a DSCR loan in an LLC.
DSCR loan vs. conventional loan for investment property
A conventional investment property mortgage qualifies on your personal income and tax returns under Fannie Mae or Freddie Mac rules, and the rate is usually lower. A DSCR loan skips personal income documentation and qualifies on the property, at a higher rate. If your returns show the income, conventional is often cheaper. If write-offs hide the income, or you hold many properties, DSCR is often the only lane that works. Side by side: DSCR loan vs. conventional for investment property.
Investment property mortgage rates
Investment property rates run above primary-residence rates on both conventional and DSCR loans, because the risk is priced higher. DSCR pricing also moves with the ratio, the prepayment term, and the loan size. Compare quotes on the same structure, and check the weekly rate benchmark for direction.
Questions borrowers ask
What is a DSCR loan?
A DSCR loan is an investment property mortgage that qualifies on the property’s rental income instead of the borrower’s personal income. The lender compares the monthly rent with the full monthly payment, including taxes, insurance, and HOA dues.
How do you calculate DSCR?
Divide the monthly rent by the monthly PITIA payment: principal, interest, property taxes, insurance, and HOA dues. Rent of $2,600 against a $2,170 payment gives a DSCR of about 1.20. Illustrative example only, not a quote. Actual APR and terms vary.
What is a good DSCR for a rental property loan?
A DSCR of 1.00 means the rent covers the payment. Many lenders price best at 1.20 or higher, and some allow ratios at or below 1.00 at a higher rate. The cutoff depends on the investor.
Do DSCR loans require tax returns?
No. DSCR loans do not use personal tax returns or pay stubs to qualify. Lenders still check credit, down payment, reserves, and the lease or market rent.
Can a DSCR loan close in an LLC?
Usually, yes. DSCR loans are business-purpose loans, and most DSCR lenders allow closing in an LLC with a personal guarantee.
Sources
No single agency publishes DSCR rules. Each investor sets its own ratio, credit, reserve, and prepayment terms, and a lender can add stricter requirements. Checked October 7, 2026.
Related
DSCR lenders by market: all 42 markets
Every page in this section, not a selected eight — a hub that links a quarter of its own children is a hub that hides the other three quarters.
- Ann Arbor, MI
- Atlanta, GA
- Aurora, IL
- Austin, TX
- Carmel, IN
- Charlotte, NC
- Chicago, IL
- Cleveland, OH
- Colorado Springs, CO
- Columbus, OH
- Dallas, TX
- Denver, CO
- Detroit, MI
- Edison, NJ
- Evansville, IN
- Fort Wayne, IN
- Fort Worth, TX
- Grand Rapids, MI
- Houston, TX
- Indianapolis, IN
- Jacksonville, FL
- Jersey City, NJ
- Lansing, MI
- Miami, FL
- Naperville, IL
- Newark, NJ
- Orlando, FL
- Paterson, NJ
- Phoenix, AZ
- Raleigh, NC
- Rockford, IL
- San Antonio, TX
- Savannah, GA
- Schaumburg, IL
- South Bend, IN
- St. Petersburg, FL
- Tampa, FL
- Wichita, KS
- Overland Park, KS
- Trenton, NJ
- Troy, MI
- Tucson, AZ
Other loan products
Not sure which of these applies to you?
That is usually the actual question. Send the situation rather than the product name — purchase or refinance, primary or investment, price range, and timeline — and you get the structures that fit, with what each one costs.