A DSCR Loan (Debt Service Coverage Ratio Loan) is a Non-QM mortgage program designed primarily for real estate investors. Instead of qualifying based on the borrower’s personal income, tax returns, or employment history, DSCR loans qualify borrowers primarily based on the cash flow generated by the investment property itself.

These programs are especially popular among:

Real estate investors
Self-employed borrowers
LLC investors
Foreign national investors
Short-term rental investors
Borrowers with multiple investment properties

How Do DSCR Loans Work?

With a DSCR loan, lenders evaluate whether the property’s projected rental income is sufficient to cover the monthly mortgage payment and related housing expenses.

The Debt Service Coverage Ratio (DSCR) measures the property’s ability to generate enough income to cover:

Principal
Interest
Property taxes
Insurance
HOA dues, if applicable

In many cases:

A DSCR of 1.00 means the property generates enough income to fully cover the housing payment
A DSCR above 1.00 indicates positive cash flow
Some programs may allow lower DSCR ratios depending on the borrower profile, reserves, and overall risk factors
Typical DSCR Loan Requirements

DSCR loans are commonly used for:

Single-family investment properties
Condominiums
Multi-unit properties
Short-term rental properties
Long-term rental investments
Real estate portfolio expansion

Because DSCR loans fall outside traditional Qualified Mortgage (QM) guidelines, interest rates, reserve requirements, and qualification standards may differ from conventional financing