DSCR Loans Explained for Real Estate Investors

A DSCR loan is a non-QM mortgage product designed for real estate investors. Instead of qualifying the borrower based on personal income, tax returns, and debt-to-income ratios, the lender qualifies the property based on its debt-service coverage ratio: the property's gross rental income divided by the total mortgage payment (principal, interest, taxes, insurance, and HOA where applicable).

Most DSCR lenders look for a ratio of 1.00 to 1.25 or higher, although programs exist for ratios below 1.00 with stronger credit and reserves. A DSCR of 1.20 means the property's rent covers 120% of the monthly debt service, leaving a 20% cushion.

DSCR loans are popular among self-employed investors, full-time landlords, and anyone whose tax returns understate their true cash flow. They are typically available on single-family rentals, 2–4 unit properties, and small multifamily, with both purchase and cash-out refinance structures.

Pricing on DSCR loans is generally above conventional owner-occupied rates because they are non-QM and held on private balance sheets or sold to specialty investors. Loan-to-value caps are usually 75–80% on purchases. Reserves of 6–12 months are common, and prepayment penalties are typical during the first 1–5 years.

Tesni connects investors to DSCR lenders and helps prepare the property-level package: lease, rent schedule, appraisal with rent comparables, and entity documentation if the loan closes in an LLC. We do not approve loans or set rates and do not guarantee program availability.