A mortgage for investment properties where qualification is based on the property's rental income rather than the borrower's personal income.
Full Definition
DSCR stands for Debt Service Coverage Ratio — the ratio of a property's gross rental income to its mortgage payment. A DSCR of 1.0 means the property breaks even; 1.25 means it generates 25% more income than its debt costs. Lenders typically require a DSCR of 1.0–1.25 for approval. DSCR loans are popular with real estate investors who own multiple properties, are self-employed, or don't want their personal income scrutinized. They're non-QM loans, meaning they don't follow conventional underwriting guidelines. Rates are higher than conventional loans but qualification is faster for experienced investors.
Related Terms
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