A DSCR loan qualifies borrowers based on the property's rental income relative to the mortgage payment, rather than personal income or tax returns. It stands for Debt Service Coverage Ratio.

What DSCR ratio do I need to qualify?

Most lenders require a minimum DSCR of 1.0 to 1.25, meaning the property's income covers 100-125% of the debt obligation. Some programs allow below 1.0 DSCR with compensating factors. At Riverside Park Capital the DSCR loan minimum is 1.10x.

Do DSCR loans require tax returns?

No. DSCR loans do not require personal tax returns, W-2s, or pay stubs. Lenders only verify the property's rental income relative to the debt obligation.

What property types qualify for DSCR loans?

Single-family homes, condos, townhomes, 2-4 unit properties, and short-term rentals (STRs) all qualify. Some programs also cover 5+ unit small multifamily.

Loan Types

What Is a DSCR Loan?

A DSCR loan (short for Debt Service Coverage Ratio loan) is a type of real estate investment mortgage that qualifies borrowers based on the rental income produced by the property rather than the borrower's personal income or tax returns. It is one of the most popular financing tools for residential real estate investors who own multiple properties, are self-employed, or whose tax returns don't reflect their true income.

How the DSCR Ratio Works

DSCR is calculated by dividing a property's gross rental income by its total annual debt obligations (principal, interest, taxes, insurance, and HOA if applicable). A DSCR of 1.0 means the property generates exactly enough income to cover the mortgage. A ratio above 1.25 is considered strong, meaning the property earns 25% more than required to service the debt. Most lenders require a minimum DSCR between 1.0 and 1.25 to qualify. At Riverside Park Capital, the minimum is 1.10x on 1-4 unit DSCR loans and 1.15x on commercial loans.

Who Uses DSCR Loans?

DSCR loans are ideal for: (1) Buy-and-hold rental investors who use depreciation and deductions that reduce reported taxable income; (2) Self-employed borrowers who don't show W-2 income; (3) Portfolio landlords looking to finance multiple properties without hitting conventional loan limits; (4) Short-term rental investors using platforms like Airbnb where gross rental income supports the loan even if occupancy is seasonal. Because DSCR loans focus entirely on property performance, lenders don't collect tax returns, W-2s, or personal pay stubs, so the approval process is faster and simpler.

DSCR vs. Conventional Loans

Conventional loans issued by Fannie Mae or Freddie Mac cap borrowers at 10 financed properties and require full personal income documentation. DSCR loans have no such cap. Investors can finance their 11th, 20th, or 50th property using DSCR underwriting. The trade-off is typically a slightly higher interest rate, usually 50 to 100 basis points above 30-year conventional rates, but the flexibility and speed of closing often outweigh the cost difference for active investors.

What Are Typical DSCR Loan Terms?

DSCR loans are typically 30-year fixed-rate mortgages, though interest-only options and ARM products are available. At Riverside Park Capital, DSCR loans go up to $5,000,000, with up to 80% LTV on a purchase, a minimum DSCR of 1.10x and a minimum FICO score of 680. Cash-out refinance leverage is confirmed per deal.

Frequently Asked Questions

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