DSCR Loan Requirements

DSCR Loan Requirements 2024: Everything you Need to Know

If you’re looking for financing for commercial real estate, you might have heard about the term ‘DSCR loan’ and been curious about what it means. DSCR is a loan type that’s becoming more popular among borrowers.

However, the questions that come always to mind before taking any step are what are DSCR loan requirements and what do they offer? so let’s start from beginning to end by covering all the questions and features of the DSCR loan.

What Is A DSCR Loan?

A mortgage loan that is specifically designed for residential income-producing properties is called a DSCR Loan. Rather than looking at the borrower’s income, the ‘Debt Service Coverage Ratio’ or property cash flow is used to determine it.

The purpose of a DSCR loan is to help real estate investors obtain a loan for their real estate investments. Eligibility can be established through the debt service coverage ratio, a significant financial metric.

You have the option to use a DSCR loan to either buy a property or refinance an existing one, depending on whether you want a cash-out or rate-and-term refinance. Residential and commercial properties are protected as long as they are not owned by the owner and used for investment purposes.

DSCR loans cover property types that are commonly used, such as single-family homes and condos, as well as multifamily houses, multipurpose houses, and short-term rental properties.

DSCR Loan Requirements

The main reason why DSCR Loans are popular is because they don’t require as much documentation as conventional loans. Although it is accurate that DSCR Loans have a lower paperwork and documentation barrier, it is inaccurate to call them “no-doc” loans. Due to their simple documentation requirements and responsible underwriting requirements, DSCR Loans have become a popular and successful loan product. 

The key requirements for DSCR loans include

DSCR as low as .75 acceptedLenders usually mandate a minimum DSCR ratio of approximately 1.25 to ensure properties can fulfill debt obligations. Griffin Funding accepts DSCRs as low as 0.75 and might consider a no-ratio DPCR below 0.75 with a larger down payment.
Credit scores as low as 620Borrowers are subject to credit evaluations, necessitating a minimum credit score of 620. However, specific criteria may vary depending on the lender and loan terms.
Minimum amount of $100,000DSCR loans accommodate properties of varying costs, offering loan amounts ranging from $100,000 to $5,000,000.
AppraisalProperties undergo appraisal to determine their current market value and rental income potential.
Property typeDSCR loans are reserved exclusively for investment properties generating rental income, thereby limiting their applicability to this specific property type.

Also Read: Coffee Break Loans Review: Coffee Break Loans Safe?

DSCR Loan Interest Rates

Several factors play a role in the determination of current DSCR loan interest rates, including the borrower’s creditworthiness, property type, loan term, and current market conditions.

Due to DSCR loans’ specialized nature, they may have slightly higher interest rates than traditional mortgage loans.

To obtain the most favorable terms, borrowers should compare the DSCR rates offered by different lenders.

How To Get A DSCR Loan

Research Lenders:

Search for lenders who are knowledgeable in DSCR loans and have experience financing properties like yours. Examine their loan programs, interest rates, and terms.

Gather Financial Documents: 

Make sure you have your financial documents together, including bank statements and proof of assets. The lender will see these documents as proof of your financial stability.

Assess Property Income Potential: 

Check that the property’s income potential meets the lender’s requirements for a DSCR loan. Consider factors like rental rates, occupancy rates, and operating expenses.

Apply for Pre-Approval:

Submit a loan request to the lender you’ve chosen for pre-approval. Make sure to provide all necessary documents and information to ease the evaluation and qualification process.

Complete the Loan Application Process: 

Once the loan application process is finished, work closely with the lender to ensure approval. Including property appraisals and income statements is part of this process.

Loan Underwriting and Approval: 

The lender will assess your application, conduct underwriting, and determine the financial viability of the property. If it’s approved, you’ll be given a loan offer that details the terms and conditions.

Closing and Funding:

Ensure that you sign the closing documents and receive the funds at the closing. Obtaining a DSCR loan and obtaining financing for their real estate investment can be made easier for borrowers by following these steps.

Down Payment Requirements

Down payment requirements for the DSCR loan program differ based on the lender, borrower’s creditworthiness, and property type.

The LTV ratio offered typically determines the requirement for a DSCR loan. For LTV ratios of 80%, it is possible that a 20% down payment is required. DSCR loans are generally repaid by a down payment of between 20 and 25% of the property’s purchase price. 

It’s important for real estate investors to prepare for this before applying for a DSCR loan.

It is highly recommended to consult with lenders who have experience in DSCR loans to gain a comprehensive understanding of the DSCR loan down payment requirements and explore available options.

Who are DSCR Loans For?

Investors in residential real estate rental properties are eligible for DSCR Loans, which are perfect for investing in a wide range of situations. DSCR Loan Requirements can be used by anyone, from a first-time real estate investor to a seasoned professional looking to grow their portfolio.

The use of DSCR Loans is generally a good loan choice for:

Self-Employed or Freelance People:

To meet traditional lenders’ requirements, investors must have steady employment and income for two years. Also, this data will be used to calculate a ‘DTI’ ratio, which will present another challenge. 

DSCR Loans are the ideal choice because they do not require W2 income, income, or DTI to be qualified. The qualification is determined by the property’s income potential, not the borrower’s income.

People who Invest in Property with Partners or a Team:

Partnering is often the right decision when investing in real estate. When it comes to financial freedom, teamwork is often the key to making dreams come true.

DSCR Loan Requirements are perfect for partnerships since unlike regular financing, borrowers have the option to borrow from a partnership or LLC (limited liability company) and share ownership!

Investors pursuing Niche Strategies Like Short-Term Rentals:

DSCR Loans are ideal for traditional rental properties, like single-family rentals Benefits of a DSCR mortgage loan, due to their flexibility. Conventional lenders, such as banks, are slow to adapt to newer strategies, while forward-thinking DSCR Lenders, like Easy Street Capital, cater to investors exploring innovative niches for maximum cash flow in short-term rentals or the BRRRR Method.

What documents are required for a DSCR Loan Requirements?

The below list covers the fairly short list of documentation requirements for DSCR Loans.

  • Application 
  • Credit Authorization 
  • Bank Statements
  • Leases
  • Short-Term Rental History
  • Insurance 
  • Entity Documents
    1. Certificates of Good Standing
    2. Certificate of Formation
    3. Articles of Organization and Operating Agreement
  • Renovation Documentation 

Benefits of a DSCR Mortgage Loan

DSCR Loan Requirements

DSCR loans allow self-employed borrowers and borrowers with unconventional income streams to qualify through flexibility in eligibility criteria. Typically, if you have a debt service coverage ratio loan, you can select between a fixed-rate or a variable-rate (ARM) loan.

DSCR loans concentrate on the property’s income-generating potential (i.e., rental income) instead of relying solely on the borrower’s personal income, broadening financing options. The lender is not required to verify your income or examine all of your personal and business income and liabilities.

DSCR loans can offer higher loan amounts than traditional mortgage loans, which can enable borrowers to finance larger real estate investments also real estate investments receive support from DSCR loans, which can provide opportunities for portfolio growth and potential long-term returns.

Pros and Cons of DSCR Loans


  • DSCR loans frequently have shorter application and closing times, requiring only the submission of personal financing documents or tax returns.
  • If you can afford it, scaling your business can be done faster due to the greater flexibility of the number of loans or properties.
  • To protect your personal assets, consider financing a DSCR loan through an entity or LLC.


  • Usually, a higher down payment (typically 15-25% of the property’s value) is required.
  • DSCR mortgages have higher interest rates and lender fees than second home loans.
  • You must provide evidence of your experience in renting (either STR or LTR).

To get a DSCR Loan Requirements, you must have a DSCR of 1.2 or higher. The debt and additional expenses will need to be covered by the property’s cash flow. 

DSCR Loans have no maximum, unlike conventional loans that only allow for up to 10 properties at a time. The property and credit score determine eligibility for each loan, but not all of the borrower’s personal income, expenses, and portfolio.

DSCR loans are typically fixed-rate loans for thirty years with a monthly payment of the same amount. An interest-only option is among the most popular choices for investors.

DSCR Loan Requirements is more comprehensive than the Interest Coverage ratio because it takes into account the income of the entity, instead of just the profit that the Interest Coverage ratio provides. DSCR covers the debt, while ICR covers how the interest is serviced.



Hello, my name is Jennifer, and I’m a freelance writer.
Having worked in finance for the last 7 years, I founded cupprogramloan.com, a blog that provides expert advice and insights on loan finance. I create high-quality content to promote financial literacy and consumer rights.

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