A DSCR loan is a rental property loan where the lender focuses mainly on whether the property's rent covers the payment. The exact rules change from lender to lender and over time, so treat the ranges below as a starting point and ask each lender for its current terms.
1. The coverage ratio (DSCR)
DSCR is usually the monthly rent divided by the monthly payment (principal, interest, taxes, insurance and any HOA). A ratio of 1.00 means the rent equals the payment. Many lenders prefer 1.0 or higher and may offer better terms above that. Some programs accept less than 1.0 with other conditions. Try your numbers in the DSCR calculator.
2. Credit score
Lender and finance pages commonly list a minimum credit score somewhere around 620 to 680, with better rates at higher scores. For example, NerdWallet's DSCR loan guide lists a score of at least 620 in its search summary. Some lenders go lower and others require more.
3. Down payment
A down payment of 20% to 25% is commonly cited. Some lenders list 15% or more, for example Cross Country Mortgage in its search summary. The amount can depend on the DSCR, the credit score and the property.
4. Reserves
Lenders often ask you to show cash reserves after closing, commonly a number of months of payments. The number varies.
5. The property
DSCR loans are for investment property, not a home you live in. Lenders usually have rules about the property type, the number of units, the condition and the location. Short-term rentals may be treated differently from long-term leases.
6. Loan size
Many lenders set a minimum loan amount. NerdWallet's summary mentions around $100,000, but this differs by lender.
7. Appraisal and rent estimate
The lender typically orders an appraisal and an estimate of market rent. Their rent number can be different from yours, which changes the DSCR.
8. Borrower and entity
Many investors buy through an LLC. Whether a lender allows it, and what it asks for, varies. Ask the lender, and ask a lawyer or tax professional about the structure that fits you.