DSCR Loans for Rental Property Investors

Your tax return can show far less income than your investment property brings in every month. On a DSCR loan that gap stops mattering, because the lender never asks for the return. Luxury Mortgage, one of the wholesale lenders (lenders that work through brokers) I place loans with, says it in its Simple Access guide dated July 31, 2026: "No income or employment is verified for this product."

A DSCR loan lets you buy or refinance an investment property by qualifying on the rent the property earns compared with its monthly cost, instead of on your personal income from your tax returns.

I'm Jeff Moran, NMLS #483943, a mortgage broker with C2 Financial Corporation in Bluffton, South Carolina, originating since 1996. Every figure on this page comes from that one guide, version 9.2, because it is a clear example of how these loans are built. As a broker I compare lenders for your file.

How is DSCR calculated?

DSCR stands for debt service coverage ratio. You take the monthly rent and divide it by the property's monthly PITIA, which is the principal and interest on the new loan plus property taxes, homeowners insurance and any association dues.

The guide's own example shows it. Rent of $1,000 against an $800 PITIA gives a DSCR of 1.25, and that qualifies, while rent of $800 against a $1,000 PITIA gives 0.80, which does not qualify on its own. The lender carries the ratio to the decimal and does not round it up, so a 0.99 is treated as below 1.00.

Nobody calculates a debt-to-income ratio on this loan. The guide says so directly: "No DTI is developed." Your other mortgages and your credit cards still show on your credit report, and your credit score still matters, but nothing gets measured against your income.

The rent figure the lender uses

The rent in that calculation comes from the appraiser and the lease, and the guide sets it a little differently depending on your situation.

• You are buying a vacant property: the lender uses the full market rent the appraiser estimates from similar rentals nearby. You do not need a lease in hand.
• You are buying a property with a tenant in place: the lender uses the lower of the market rent or the rent in the lease.
• You are refinancing: the lender uses the lower of your current lease or the appraiser's market rent.

A property you rent out as a short-term rental, meaning stays of less than six months, can still work on a one-to-four unit property, with documentation and a lower maximum loan-to-value. I can walk you through that part on the phone, because it depends on what you can show for income and on whether the town allows short-term rentals.

DSCR loan requirements

The loan-to-value limits, meaning the loan amount divided by the property's value, depend on your credit score, the loan size and the DSCR together. Reserves are the savings you have left after closing, counted in months of PITIA. The table has the headline limits from the guide, and I'll give you the exact ones for your file when we talk.

Item	Luxury Mortgage guide, July 31, 2026
Minimum DSCR	1.00 for most files. The guide's limits go down to 0.75 with a higher credit score, a lower loan-to-value and extra reserves
Occupancy	Investment property only
Loan amount	$150,000 minimum, $4,000,000 maximum
Credit score	For one-to-four unit properties, the minimum is 620 when the DSCR is 1.00 or higher, and 660 below 1.00
Loan-to-value	Up to 80% on a purchase or a rate-and-term refinance (a refinance that does not take cash out) at the higher scores and smaller loan amounts. Up to 75% on a cash-out refinance, where you borrow more than you owe and keep the difference
Reserves	6 months up to $1,000,000, 9 months from $1,000,000 to $3,000,000, and 18 months from $3,000,000 to $4,000,000. Add 6 more months when the DSCR is below 1.00
Reserves on your other properties	None required
Prepayment penalty	Available on investment properties, with terms of 1 to 5 years

A DSCR below 1.00

Some of these files still work. In the 0.80 example above, the rent is $800 and the payment is $1,000. The guide makes that property eligible when the loan-to-value is 75% or less and your credit score is 680 or higher. You also need 6 additional months of PITIA in reserves on top of the usual requirement. Anything below 0.75 is not eligible, and a DSCR between 0.75 and 1.00 can carry higher pricing than a property that covers its own payment.

DSCR loan for first-time investors

The guide asks for a 12-month history of owning and managing rental property from at least one person on the loan, unless the DSCR is above 1.00. So if the property covers its own payment with something to spare, you can be new to being a landlord, though the guide generally expects you to own a home or an investment property already.

If it does not, you can still buy as a newer investor with four things in place. Your credit score is 680 or higher. You own the home you live in now. You have had no housing payment more than 30 days late in the past 12 months. A forbearance is a pause a lender agrees to on your mortgage payments, and the last condition is that you have had no forbearance that came with a missed payment in those same 12 months.

DSCR loan in an LLC

You can take title in an LLC, and the guide accepts that in every area it lends. At least one member of the LLC has to qualify and personally guarantee the loan, and the members on the loan together have to own at least half of the LLC. The LLC can have up to four members, and each one has to be an individual. The LLC holds title to the property, and you still sign the note yourself. The note is your promise to repay the loan.

DSCR loan prepayment penalty

A prepayment penalty is a fee for paying the loan off early. On an investment property, where state and federal law allow it, the guide offers terms of 1 to 5 years, and a longer term changes the pricing. The penalty is six months of interest on whatever you pay off in a 12-month period beyond 20% of the original loan balance. So you can pay down up to a fifth of the original balance in a year without owing it.

The loan has to be for business purposes to carry a penalty at all. A cash-out refinance that pays off personal debt, or an investment property a family member will live in, counts as a personal-purpose loan, and the lender cannot put a prepayment penalty on it.

The investor a DSCR loan is built for

This loan is built for an investor whose tax returns show far less income than the properties earn, and for a growing investor who does not want each new purchase measured against last year's return. It also suits anyone who wants to buy in an LLC.

The rate on a DSCR loan is priced from your credit score, the loan-to-value, the DSCR, the loan size and the prepayment term, so there is no DSCR rate in my online rate tool. On a loan like this, a broker can compare several lenders for you. If you are weighing other options, conventional financing on an investment property is worth comparing, a bank statement loan works from your deposits if you are self-employed, and which mortgage fits you puts the programs side by side.

Talking it through on the phone

When you're ready, please call me at 843-765-0000. Calls are welcome whether or not you have started an application. If you can tell me about the property, the rent and what you plan to do with it, I can tell you which of my lenders looks like the best match.

Nothing here is a loan approval, a denial, or a commitment to lend. These terms are one lender's, dated July 31, 2026; other lenders set their own, and they change.

Common questions

Does a DSCR loan require tax returns?

Not for your income. Under the Luxury Mortgage guide the lender does not verify income or employment and does not calculate a debt-to-income ratio. The lender still looks at your credit, your savings for reserves and the property itself.

Can I use a DSCR loan on my own home?

No. DSCR loans are for investment property, never a home you will live in.

What credit score do I need for a DSCR loan?

The guide's minimum is 620 when the DSCR is 1.00 or higher and 660 below that. A higher score opens up a higher loan-to-value and a larger loan.

Can a DSCR loan work if the rent does not cover the payment?

Sometimes. A DSCR between 0.75 and 1.00 can work with a higher credit score, a lower loan-to-value and 6 additional months of reserves. Below 0.75 the property is not eligible.

Can I use short-term rental income?

On a one-to-four unit property, yes, with documentation and a lower maximum loan-to-value. The guide does not allow short-term rent on properties with five to ten units.

Is there a prepayment penalty on a DSCR loan?

Often, on an investment property, where the law allows it. The terms run from 1 to 5 years, a longer term changes the pricing, and we choose the term together before you commit.