DSCR Loans: Financing Investment Properties with Income in Mind

If you’re a real estate investor or thinking about purchasing an income-producing property, a DSCR loan could be a smart financing option. DSCR stands for Debt Service Coverage Ratio, which is a measure of a property’s ability to generate enough income to cover its mortgage payments. Unlike traditional loans that focus heavily on a borrower’s personal income, DSCR loans primarily evaluate the property’s cash flow to determine eligibility.

This makes DSCR loans particularly attractive for investors who own multiple rental properties, want to purchase multi-unit buildings, or are looking to expand their real estate portfolio without relying solely on their personal income. Lenders typically look for a DSCR of 1.0 or higher, meaning the property produces at least enough income to cover its debt, with higher ratios often allowing for better loan terms.

DSCR loans are versatile: they can be used to purchase new investment properties, refinance existing ones, or consolidate debt. They are generally available for single-family rentals, duplexes, triplexes, fourplexes, and small multifamily buildings. While down payments are usually higher than traditional residential loans—often ranging from 20-30%—DSCR loans offer investors flexibility that standard mortgage programs may not.

At The River City Lending Team, we specialize in helping investors navigate DSCR financing and find the right strategy for their goals. Whether you’re just getting started or looking to grow your portfolio, a DSCR loan can help you leverage rental income and take your real estate investing to the next level.

FAQs

  • A DSCR (Debt Service Coverage Ratio) loan is a type of investment property loan that evaluates a property’s ability to generate income to cover its mortgage payments, rather than focusing solely on the borrower’s personal income.

  • DSCR loans are popular with real estate investors and landlords who own or are purchasing income-producing properties, like single-family rentals, multi-unit buildings, or small apartment complexes.

  • The Debt Service Coverage Ratio is calculated by dividing the property’s net operating income (NOI) by the proposed mortgage payment. Lenders generally require a DSCR of 1.0 or higher, meaning the property generates enough income to cover its debt.

  • Many DSCR loans focus primarily on the property’s income, so personal income verification may be minimal or not required, depending on the lender.

  • Typically, single-family rentals, duplexes, triplexes, fourplexes, and small multifamily buildings are eligible. Properties must be income-producing.

  • Yes. Investors can use DSCR loans to refinance existing investment properties, access equity, or consolidate debt.

  • Interest rates on DSCR loans may be slightly higher than traditional residential loans because they are primarily based on the property’s cash flow rather than personal income.

  • Yes, down payment requirements vary by lender and property type, but they typically range from 15-30% for investment properties.

  • DSCR loans provide flexibility for investors whose personal income may not align with the property purchase, allowing them to leverage rental income to qualify for financing.