DSCR Loan

(Debt Service Coverage Ratio)

What is DSCR loan?

A DSCR (Debt Service Coverage Ratio) loan is a No-Doc loan that is underwritten based solely on the rental income generated from an investment property.
The key feature is that it does not require personal tax returns or income verification—approval is based only on the property’s income potential.

 

We are not limited to just one program. Together with Loan Factory, we compare over 120 different DSCR loan products to provide you with the most favorable terms.  Loan Factory is the largest mortgage brokerage in the U.S. with over 18 years of experience and consistently handles the highest number of home loans nationwide each year.

 

If you need a DSCR loan, we offer free pre-approvals with no obligation and guide you professionally through every step of the process.

DSCR =

Gross Rent
 
PITIA

DSCR Formula: 

 

  • PITIA:  Principal + Interest + Taxes + Insurance + HOA (if applicable)

  • Example:

    • Monthly Rental Income: $2,500

    • Monthly PITIA: $2,200

    • 👉 DSCR = 1.14 → Approval Likly

 
 
 

Basic Loan Summary:

Item Details
Eligible Properties Investment properties: single-family homes, condos, multifamily (2–4 units), etc.
DSCR Requirement Usually 1.0 or higher (some cases allow as low as 0.75)
Down Payment Typically 20%–25%
Credit Score (FICO) Minimum 660–680
Income Documentation Not required (No Doc – no tax returns, W-2s, etc.)
Entity Ownership Allowed (LLC, Corp)
Loan Amount From $100K up to $3M+
Loan Term 30-year fixed or ARM (5/1, 7/1, etc.)
Prepayment Penalty Typically 3–5 years applies
 
 
 

Advantages:

  • Ideal for self-employed or foreign investors with difficulty proving income

  • Simple underwriting based on rental income only

  • Suitable for investment properties held under an entity name

  • Fast approvals with flexible terms

  • Can be used by investors with multiple properties

 


⚠️ Important Notes:

  • ❌ Not available for primary residences

  • ❌ Higher interest rates than conventional loans

  • ❌ Difficult to qualify if DSCR < 1.0 (unless with lower LTV)

  • ❌ Most loans have prepayment penalties (typically 3 or 5 years)

 

 

📌 Who DSCR Loans Are Best For:

  • Investors who want to purchase or refinance investment properties without income documentation

  • Foreign investors (even without a Social Security Number)

  • Investors operating short-term or long-term rental properties

  • Borrowers looking to cash out equity from existing properties


DSCR 2nd Mortgage

you can get a 2nd mortgage on an investment property, but it comes with stricter requirements compared to a primary residence.

 

 

✅ Key Points for 2nd Mortgage on Investment Property:

Requirement Details
Equity You must have significant equity (typically at least 30–40% left after 1st mortgage)
Credit Score Usually 680–700+ required
Rental Income Must be documented or backed by market rent (can factor into DTI or DSCR)
LTV Limits Combined Loan-to-Value (CLTV) usually max 70–75%
Loan Type Usually through portfolio lenders, private lenders, or DSCR-based 2nd lien products
Use of Funds Cash-out for renovations, new investments, debt consolidation, etc.

 

❌ Not Typically Offered By:

  • FHA, VA, or USDA — those are for primary residences only

  • Fannie/Freddie — 2nd liens for investment homes are rare through conventional lenders

 

🛠 Example Scenario:

  • Property value: $500,000

  • 1st mortgage balance: $300,000

  • Max CLTV: 75% → $375,000

  • So, 2nd mortgage possible: up to $75,000


Terry Kwon
Ph: (631) 624-4480

Licensed Mortgage Originator
NMLS #2620208