Loan Products · March 16, 2025
DSCR Loans: The Real Estate Investor's Guide to Income-Based Financing
DSCR loans qualify investors on rental income rather than personal income — eliminating the biggest qualification barrier for real estate investors.
DSCR (Debt Service Coverage Ratio) loans have transformed investment property financing. They solve the number one problem that stops investors: qualifying on personal income when real estate deductions minimize reported income on tax returns.
The Core Concept
DSCR = Gross Monthly Rental Income divided by Monthly PITI.
No personal income documentation. No tax returns. No employment verification. The property's cash flow is the qualification.
How Lenders Use DSCR
DSCR 1.25+: Strong approval, best pricing. DSCR 1.0-1.24: Approved at most lenders. DSCR 0.75-0.99: Available at some lenders with larger down payment. DSCR below 0.75: Very limited options.
Requirements Beyond DSCR
Credit score: typically 680+ (700+ for best rates). Down payment: 20-25% typical. Reserves: 6-12 months PITI post-closing. Property types: single-family, 2-4 unit, condos, short-term rentals. Title: can close in LLC for liability protection.
Portfolio Scaling
Unlike conventional loans capped at 10 financed properties, most DSCR lenders have no limit on the number of properties. Investors with 10, 20, or 50+ properties use DSCR as their primary scaling tool.
Short-Term Rental DSCR
STR-specific lenders underwrite based on projected STR income using AirDNA or similar market data rather than long-term lease comparables.
HMS places DSCR loans regularly. Call 309-222-8286 to run your property's numbers.