Investment financing that qualifies on the property’s rent, not your paycheck.
A debt service coverage ratio loan is for rental property only. The lender compares the property’s rent to its full payment; if the rent covers it, your personal income and tax returns largely stay out of the file. It is a business-purpose loan with business-purpose terms.
- Are buying or refinancing a rental, not a home you’ll live in
- Own several properties and have hit conventional limits or paperwork fatigue
- Are self-employed and would rather not document personal income
- Want to vest title in an LLC
Who it may fit
Real estate investors, from a first rental to a portfolio. DSCR loans are a business-purpose product: the property must be non-owner-occupied and held for investment. First-time investors are accepted by many investors, sometimes with slightly tighter terms; experience with rentals helps pricing.
Short-term rental income is accepted by some investors using documented history or market data, with limits. Condos, 2–4 units, and small multifamily are common; condotels and rural properties are narrower.
How it works
The ratio is gross monthly rent divided by the full monthly payment (principal, interest, taxes, insurance, and association dues). A ratio of 1.0 means rent exactly covers the payment; most programs want 1.0 to 1.25, with the best pricing above that. Some allow ratios below 1.0 with more down and higher rates. Rent is documented with a lease and/or the appraiser’s market rent schedule.
Credit matters: 660 is a common floor, 700+ for better terms. Down payments start around 20–25%; reserves of several months are usual. Terms include 30-year fixed, interest-only periods, and adjustable options. Prepayment penalties of 1 to 5 years are common and reduce the rate; you can usually buy them down or out.
What it may help solve
- Qualifying for a rental when tax returns, depreciation, or a high personal debt ratio block conventional financing
- Scaling past the conventional cap on financed properties
- Closing in an LLC, which conventional loans generally don’t allow
- Cash-out refinances on properties with strong rent to fund the next purchase
Tradeoffs and eligibility
- Higher rate and fees than a conventional investment loan; price it against conventional when you qualify for both
- Prepayment penalties are the norm; know the term before you plan a quick sale or refinance
- Insurance costs drive the ratio in Florida: wind and flood premiums can turn a 1.2 into a 1.0
- Not for primary residences or second homes you occupy; occupancy misrepresentation is fraud
- Fewer consumer protections apply to business-purpose loans; read the terms
What you may need
- Photo ID and entity documents if vesting in an LLC (articles, operating agreement, EIN)
- Executed lease(s) or short-term rental history; otherwise the appraiser’s rent schedule
- Two months of asset statements for down payment and reserves
- Insurance quotes (wind, flood, liability) early, because they drive the ratio
- HOA dues and budget for condos
- Schedule of real estate owned with mortgage statements
- Purchase contract or current mortgage statement for a refinance
Common questions
What ratio do I need?
Can I count short-term rental income?
Do I need landlord experience?
Can I close in an LLC?
DSCR or conventional for my rental?
Related options
Send the address, expected rent, and your target down payment.
Jared will estimate the ratio with realistic Florida insurance and tell you where you stand.
- No credit pull, no obligation
- Not an application; no guarantee of approval or terms
- Rather talk? Call or text 954-649-0020