In short: a DSCR (debt service coverage ratio) loan is a non-QM mortgage for investment property. The lender looks at whether the property's rent covers the monthly payment, not at your salary or tax returns. Down payments are usually 20% to 25%, and the property must be a rental, not your residence.
How DSCR is calculated
DSCR = monthly rent ÷ total monthly payment (principal, interest, property tax, insurance, plus HOA dues if any). The figures below only illustrate the math and are not a quote:
| Item | Amount (example) |
|---|---|
| Market rent | $3,600 |
| Principal and interest | $2,450 |
| Property tax | $520 |
| Insurance | $150 |
| Total monthly payment | $3,120 |
| DSCR | 3,600 ÷ 3,120 ≈ 1.15 |
Most lenders want a DSCR of at least 1.0. Some programs go below 1.0 with a larger down payment and higher rate, and a ratio around 1.25 or higher usually earns better terms.
How rent is determined
For a leased property, the lender uses the current lease. For a vacant or newly purchased property, it uses the appraiser's market rent schedule (Form 1007). Some lenders accept short-term rental income, usually with 12 months of platform statements.
Terms to watch
- Prepayment penalty: most DSCR loans carry one, often a three- or five-year step-down such as 5-4-3-2-1. If you may sell or refinance within a few years, choose a shorter penalty or none.
- LLC borrowing: many programs lend to an LLC, usually with a personal guarantee.
- Reserves: expect to keep several months of payments in reserve.
- Credit score: income is not reviewed, but credit is, and higher scores get better pricing. Buyers without U.S. credit can look at foreign national loans.
Who it suits
Investors with several rentals and modest taxable income, buyers who paid cash for a foreclosure and want to pull funds back out, and buyers of out-of-state Section 8 rentals.
How Aspire LaShine can help
Our loan desk works with 100+ wholesale lenders, so you can compare DSCR thresholds and prepayment terms on the same property. See Loan Programs or call (714) 470-0170.
Sources
- Fannie Mae Form 1007, Single-Family Comparable Rent Schedule
General information only, not a loan commitment. The example is illustrative; actual terms depend on lender approval. Information as of October 2026.
