DSCR loans · Investment property
Qualify a rental on the rent it brings in, not your tax returns.
A DSCR (debt service coverage ratio) loan qualifies an investment property on its monthly rent divided by its monthly payment. There is no personal income calculation, no tax returns and no debt-to-income ratio, and you can close in an LLC. We typically close Non-QM loans in about 12 days.
The formula
How is DSCR calculated?
DSCR equals the property’s gross monthly rent divided by its full monthly payment: principal, interest, property taxes, insurance and any HOA dues (PITIA). A DSCR of 1.00 means the rent exactly covers the payment.
The rent used is usually the lower of the signed lease or the appraiser’s market rent estimate. Some lenders allow an above-market lease up to a cap, such as 125% of market rent. On an interest-only loan, many lenders divide the rent by the interest-only payment instead, which raises the ratio.
| Worked example | Amount |
|---|---|
| Purchase price | $650,000 |
| Down payment (25%) | $162,500 |
| Loan amount | $487,500 |
| Principal & interest (7.00%, 30-year fixed) | $3,243 / mo |
| Property tax (about 1.1%) | $596 / mo |
| Insurance | $150 / mo |
| Total payment (PITIA) | $3,989 / mo |
| Market rent | $4,200 / mo |
| DSCR | 4,200 ÷ 3,989 = 1.05 |
| With 10-year interest-only (payment $3,590) | 4,200 ÷ 3,590 = 1.17 |
Illustration only, not a quote. The rate is a placeholder. Run your own property in the DSCR calculator.
Typical requirements
What DSCR do I need, and what else do lenders check?
Most DSCR programs give their best terms at a ratio of 1.00 or higher. Many also lend between 0.75 and 0.99, and some offer “no-ratio” loans, each with a lower maximum loan-to-value.
| DSCR tier | Typical max LTV (purchase) | Typical max LTV (cash-out) | Typical credit |
|---|---|---|---|
| 1.00 and up | 75–80%, up to 85% at 720+ | 70–75%, up to 80% at 720+ | 620–680+ |
| 0.75 to 0.99 | 70–75% | 60–70% | 680+ |
| No ratio | 65–75% | 60–65% | 680–700+ |
Typical ranges for loans up to about $1 million in 2026. Limits step down for larger loans, condos and 5–8 unit properties.
Reserves: usually 3 months of payments, 6 months for larger loans, and 12 months above about $2 million. Cash-out proceeds often count.
Loan size: commonly $100,000 to $3 million, with larger loans available case by case.
Property types: 1–4 unit homes, townhomes and condos, including many non-warrantable condos. Some programs cover 5–8 units and mixed use for experienced investors.
Terms: 30-year fixed and adjustable, with 10-year interest-only options and 40-year terms at many lenders.
Airbnb and VRBO
Can I use a DSCR loan for a short-term rental?
Often, yes, but short-term rental rules vary more than anything else in DSCR lending. Some lenders accept 12 months of booking history or an AirDNA projection; others do not finance short-term rentals at all.
- Income source: 12 months of platform history, or an AirDNA market report for a new purchase.
- Income haircut: lenders commonly count 70–80% of projected income, or deduct a management fee around 20%.
- Lower leverage: some programs cut maximum LTV by about 5% without a full year of history.
- Local rules: the city must allow short-term rentals at that address. Many California cities restrict them.
Structure
LLC vesting, prepayment penalties and first-time investors
LLC vesting: DSCR loans can close in an LLC or other business entity, with a personal guaranty from the members. That keeps the property out of your personal name.
Prepayment penalties: many DSCR loans carry one, commonly a 1- to 5-year step-down such as 5-4-3-2-1, a flat percentage, or six months’ interest. Buying the penalty out typically costs about a quarter to a half point in rate. Whether a penalty can apply depends on the property’s state and the lender, so we will show you pricing with and without one.
First-time investors: usually allowed, with limits such as a lower maximum LTV and no cash-out or short-term rental financing. First-time homebuyers generally cannot use a DSCR loan.
Common questions
DSCR loan FAQ
What is a DSCR loan?
A DSCR loan is an investment property mortgage that qualifies on the property’s debt service coverage ratio: its gross monthly rent divided by its full monthly payment. The lender does not use your personal income, tax returns or debt-to-income ratio.
What is a good DSCR for a loan?
A ratio of 1.00 or higher qualifies for the best terms at most lenders, and some require 1.20 above 80% loan-to-value. Ratios from 0.75 to 0.99 are often allowed with a larger down payment.
How much do I need to put down on a DSCR loan?
Typically 20% to 25%. Strong credit and a ratio above 1.00 can allow 15% to 20% down at some lenders; lower ratios, short-term rentals and larger loans need more.
Do DSCR loans require tax returns?
No. DSCR loans qualify on the property’s rent, so there is no personal income documentation. Lenders still check credit, reserves, the appraisal and the lease or market rent.
Can I get a DSCR loan in an LLC?
Yes. Most DSCR programs allow vesting in an LLC or corporation with a personal guaranty.
Can I do a cash-out refinance with a DSCR loan?
Yes. Cash-out is commonly allowed up to 70–75% of the property’s value, and up to 80% at some lenders for strong credit and smaller loans.
How fast can a DSCR loan close?
We typically close Non-QM loans in about 12 days, DSCR included. Because there is no personal income to document, DSCR files are often the quickest Non-QM loans to close.
Run your property
Send the address and the rent
Send Justin the property address, the rent or the listing, and your target down payment. You’ll get the DSCR, the programs it fits and the cash to close, usually the same day.
Franklin Direct is a mortgage lender in Ladera Ranch, California, powered by Franklin Loan Center. Our team specializes in Non-QM, self-employed and investor loans, and we typically close Non-QM loans in about 12 days.
Three ways to start
Apply now, or email or text Justin directly — usually answered the same day.