How DSCR loans actually work
A DSCR loan is a non-QM investor mortgage that qualifies on the property's rental income, not your W-2s or tax returns. Expect roughly 20% to 25% down, a credit score of 620+, and rates a bit above conventional (broadly 6% to 8% in 2025 to 2026).
DSCR loans have become the workhorse mortgage for rental investors, because they sidestep the part of conventional lending that trips investors up: proving personal income.
What makes a DSCR loan different
A conventional mortgage scrutinizes your W-2s, tax returns and debt-to-income ratio. A DSCR loan asks a simpler question: does the property earn enough to cover its own payment? If the rent supports the loan, the deal can qualify even when your tax returns show modest income. You can typically close in an LLC, and there is no cap on the number of properties.
Typical requirements (2025 to 2026)
| Factor | Typical |
|---|---|
| Minimum DSCR | 1.0 to 1.25 (1.20+ for best pricing) |
| Down payment | 20% to 25% (75% to 80% LTV) |
| Interest rate | ~6% to 8%, roughly 1 to 2 points above conventional |
| Credit score | 620+ floor, 680 to 740+ for best terms |
| Cash reserves | 3 to 12 months of payments |
The trade-offs
Convenience has a price. DSCR loans usually carry a slightly higher rate than a comparable conventional loan, often want a larger down payment, and may include a prepayment penalty in the early years. In exchange you get speed, simpler paperwork, and the ability to keep buying without your personal debt-to-income ratio getting in the way. They also avoid the agency loan-level price adjustments that can add 0.5% to 1.5%+ to conventional investor rates.
How much can the property borrow?
Lenders work backward from the DSCR: take the property's income, divide by the target ratio for the maximum payment, then back out the largest loan that payment supports at current rates. The calculator below does exactly that.
Frequently asked questions
What credit score do I need for a DSCR loan?
Most DSCR lenders start around 620, with better pricing at 680 to 700+ and the best terms for 740+. Personal income is not verified, but credit and reserves still drive your rate.
What is the minimum DSCR to qualify?
Commonly 1.0 to 1.25. Many lenders target 1.20+, and some offer below-1.0 or no-ratio programs with a larger down payment and more reserves.
How much down payment do DSCR loans require?
Typically 20% to 25% (75% to 80% loan-to-value). Twenty percent is usually the floor, and 25% down tends to unlock the best pricing.
Can I close a DSCR loan in an LLC?
Yes. Closing in an LLC is one of the main attractions of DSCR loans for investors, along with no personal income documentation and no limit on the number of financed properties.
Are there prepayment penalties?
Often, yes. Many DSCR loans include a step-down prepayment penalty in the first few years. Ask the lender for the structure and factor it in if you plan to sell or refinance soon.