DSCR Loan

The DSCR calculation is straightforward: divide the property's gross monthly rent by the monthly PITI payment (principal, interest, taxes, insurance). A property generating $3,000 per month in rent with a $2,500 PITI payment has a DSCR of 1.20x — above the typical minimum of 1.0x–1.10x required by most direct lenders. Some lenders will approve loans at DSCR ratios below 1.0x (called 'no ratio' or 'below 1.0 DSCR' programs) with compensating factors like a higher down payment or strong credit.

DSCR loans are available for single-family rentals, 2–4 unit properties, and in some cases small multifamily properties up to 10 units. Loan amounts typically range from $100,000 to $5 million, with rates 1%–3% above conventional investor rates. Down payment requirements start at 20%–25% for most direct lenders, though some programs allow 15% down with mortgage insurance. Interest-only options are widely available, which improves cash flow and DSCR simultaneously.

The DSCR loan has become the dominant product for real estate investor financing because it scales with the portfolio rather than with the investor's W-2 income. A direct lender offering DSCR products evaluates each property independently, meaning an investor can hold multiple DSCR loans simultaneously without hitting conventional fannie Mae investment property limits (currently 10 financed properties). Top direct lenders in the DSCR space include Visio Lending, Kiavi, RCN Capital, and dozens of regional non-bank lenders.