DSCR loans explained simply

Updated October 20, 2026 · by ROW Home Solutions

Estimates only, not financial advice. This article is general education. Lender rules, rates, taxes and insurance vary by person, property and state. Verify every number and talk to a lender and a licensed professional before you buy.

A DSCR loan is a rental property loan that qualifies mainly on the property's income instead of your personal income. DSCR stands for debt service coverage ratio.

The ratio

DSCR = monthly rent ÷ monthly housing payment
(payment usually = principal + interest + taxes + insurance + HOA)

Example: $2,400 rent ÷ $2,000 payment = 1.20

A DSCR of 1.0 means the rent just covers the payment. Above 1.0, there's a cushion; below 1.0, it doesn't cover. Each lender sets its own minimum and decides how it measures rent (often a lease or an appraiser's rent estimate). Ask the lender exactly how they calculate it.

Who uses them

Self-employed investors whose tax returns show low income
Investors who already own several properties
People buying in an LLC (check with the lender)

Trade-offs to ask about

Rates and fees are often higher than conventional loans. Compare quotes.
Down payment requirements are often larger.
Some carry prepayment penalties if you sell or refinance early. Read that section carefully.
Lenders still check credit and want to see reserves.

Important

A DSCR that passes the lender's minimum doesn't mean the deal cash flows. DSCR usually ignores vacancy, repairs, capex and management. Run full cash flow too.

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