What Is a DSCR Loan?
A DSCR (Debt Service Coverage Ratio) loan is a mortgage for investment properties that qualifies you based on the rental income from the property, not your personal income. The bank looks at whether the rent covers the mortgage payment plus expenses - if the property makes enough money, you get approved. This means no tax returns, no pay stubs, and no employment verification needed, making it perfect for real estate investors who want to grow their portfolio quickly.
Who Is It Best For?
DSCR loans are best for real estate investors who own rental properties or want to buy them, especially if you're self-employed or have complicated taxes that make regular mortgages tough. They're perfect if you have good credit (usually 680+) and 20-25% to put down, and you want to buy multiple properties without the hassle of proving personal income each time.
Who Should Think About It Twice?
If you're buying your first home to live in, DSCR loans aren't for you - they're only for investment properties. The rates are higher than regular mortgages (usually 1-2% more), and you need more money down. If the property doesn't generate enough rent to cover the payments by at least 25%, you won't qualify, so forget about fixer-uppers that won't rent right away.
Pros and Cons
| Pros | Cons |
|---|---|
| No personal income verification needed | Higher interest rates than regular mortgages |
| Can close in 2-3 weeks | Need 20-25% down payment minimum |
| Buy unlimited properties | Only for investment properties, not primary homes |
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