What is a DSCR Loan?
A DSCR (Debt Service Coverage Ratio) loan is a type of mortgage that qualifies borrowers based on the cash flow of the investment property rather than personal income. This makes them ideal for self-employed investors, those with complex tax returns, or anyone who wants to scale without traditional income limitations.
How the DSCR Ratio is Calculated
The DSCR ratio is simple: divide the property's gross monthly rental income by its total monthly debt obligation (PITIA — principal, interest, taxes, insurance, and association dues). A ratio of 1.0 means the property breaks even; above 1.0 means positive cash flow.
For example, if your Airbnb generates $4,000/month in rental income and the total PITIA is $3,200/month, your DSCR ratio is 1.25. Most lenders require a minimum of 1.0, though some programs allow ratios as low as 0.75 with compensating factors.
Benefits for STR Investors
The biggest advantage of DSCR loans is the elimination of personal income documentation. No tax returns, no W-2s, no pay stubs. You can also vest in an LLC or business entity, close in as few as 21 days, and access loan amounts up to $2 million.
Getting Started
Ready to explore DSCR financing for your next short-term rental? Contact our team to get pre-qualified. We'll walk you through the process and help you understand your buying power based on your target property's income potential.