Who this is for
DSCR loans are for investors buying or refinancing rental property. The underwriting flips the usual question: instead of looking at your income, the lender looks at the property's income. If the rent covers the mortgage payment, you qualify.
That makes DSCR the right tool when conventional investment loans don't work — usually because you've already maxed out the Fannie/Freddie 10-property limit, your tax returns don't show enough W-2 income, or you're scaling fast and don't want each new acquisition counting against your personal DTI.
How DSCR actually works
DSCR stands for Debt-Service Coverage Ratio. The math is simple:
DSCR = Monthly Rent ÷ Monthly PITIA
PITIA is principal, interest, taxes, insurance, and HOA. If the rent is $3,000 and PITIA is $2,400, your DSCR is 1.25 — strong territory. Most lenders want 1.0 or higher (rent covers payment); some go to 0.75 with a rate hit. Above 1.25 you typically get the best pricing.
What you actually need
- Down payment: 20-25% typical. Some lenders go to 15% with strong credit and DSCR; some require 25%+ for cash-out or 2-4 unit.
- Credit score: 660 minimum for most lenders, 680+ for the best pricing. Below 660 the program gets expensive fast.
- Reserves: 3-12 months of PITIA in liquid reserves, depending on lender and how many financed properties you already have.
- Property type: 1-4 unit residential, condos (warrantable), some lenders do 5-10 unit small commercial. Short-term rental (STR) income is allowed by some lenders, not others — pricing differs.
- No tax returns, no W-2s, no income verification. The property's projected or actual rent is the qualifying number. You'll provide a market rent analysis (Form 1007) or a current lease.
- LLC ownership allowed. Most DSCR lenders allow loans to be made directly to an LLC — useful for asset protection and how serious investors structure deals.
What DSCR loans cost
Honest answer: more than conventional. Expect rates 0.5-1.5% higher than a conventional investment loan for the same property. The premium pays for the loose qualification. The math has to work even at the higher rate — if it doesn't pencil with DSCR pricing, the deal probably doesn't pencil at all.
Prepayment penalties are common on DSCR loans. Typical structures: 5/4/3/2/1 (5% penalty if paid off in year 1, dropping each year), or 3/2/1, or step-down. Some lenders offer no-prepay options at a slight rate premium. If you might refinance or sell within 5 years, this is a key negotiation.
Florida-specific notes
- Insurance is the wildcard. Florida investment property insurance has gotten brutal in coastal counties. A property that pencils at $300/month for insurance might quote at $700+ in real life. We require an actual quote (not an estimate) before underwriting because it changes the DSCR.
- STR markets matter for which lender to use. Some Florida cities allow short-term rentals (Destin, Miami, Orlando areas, Naples, etc.). Some lenders will use AirDNA or actual STR income; others require long-term rental projection only. The same property can have a 1.4 DSCR on STR income and a 0.85 on LTR — which lender you pick determines whether the deal works.
- HOA review still happens. If the property is in a condo or HOA, the project is reviewed for warrantability. Post-Surfside, this matters. Non-warrantable condos can still close DSCR with the right lender, but pricing changes.
- Hurricane shutters / wind mitigation. Same as primary — wind mitigation features lower insurance, which improves DSCR. On a thin deal, this can be the difference.
Common DSCR scenarios
Past 4 conventional
Already at 4-5 financed properties through Fannie. Pivoting to DSCR for #5+ to keep growing without DTI constraints.
Vacation rental in Naples or Destin
STR income on AirDNA shows 1.4+ DSCR. We pick a lender that uses STR income — pricing is sometimes a small premium over LTR, but the deal works.
Heavy tax write-offs
Tax returns show low income from your business; the property cash-flows fine. DSCR ignores your personal income — qualifies on the rent. Common play.
Title in entity
Buying through an LLC for liability separation. Most DSCR lenders allow this; some require personal guarantees, some don't. We match you to the right lender for your structure.
When DSCR isn't the move
- 1-4 financed properties total, strong W-2 income — conventional investment usually prices better. Only graduate to DSCR when conventional limits become a real constraint.
- Property that doesn't cash-flow at DSCR pricing — if the math doesn't work at DSCR rates, the deal doesn't work at all. Don't force it.
- Owner-occupied purchase — DSCR is investment only. Conventional, FHA, or VA for primary.
- Short-term flip strategy — DSCR's prepay penalties hurt you if you exit in year 1-3. Bridge or hard money may fit better.