A DSCR loan qualifies a rental on its own income. If the rent covers the payment, your personal tax returns usually aren’t part of the approval.

The calculation

DSCR = monthly rent ÷ monthly PITIA (principal, interest, taxes, insurance and HOA).

Rent of $3,200 and a $2,900 payment gives 1.10. At 1.0 or higher you get the strongest terms; select programs accept ratios below 1.0, and some even offer no-ratio options at lower leverage.

Typical parameters

  • Credit from 660 on most programs (620 on select programs).
  • Up to 75% loan-to-value on purchases and cash-out refinances.
  • Loans from $100,000 to $3,000,000.
  • 1–4 unit investment properties, with LLC vesting available on many programs.

When it beats a conventional investment loan

  • Your tax returns show low income because of depreciation and write-offs.
  • You’re near the cap on financed properties for conventional loans.
  • You want to close in an LLC.

The trade-offs

Higher rates than conventional, larger down payments, and prepayment penalties on many programs. Check local short-term rental rules before counting on Airbnb income.

Examples are for illustration only. Not a rate quote, a credit decision or a commitment to lend. Programs, terms and timelines vary by lender, property and borrower and are subject to approval. Larz Martin NMLS #2026245, Lumin Lending, Inc. NMLS #2716106. Equal Housing Opportunity.