What is a DSCR Mortgage?

[Terry Fann]

💡 What is a DSCR Mortgage?

A DSCR (Debt Service Coverage Ratio) mortgage is a type of loan designed specifically for real estate investors. Instead of focusing on your personal income, lenders evaluate the cash flow of the property you're buying or refinancing.

📊 How DSCR is Calculated

The formula is simple:

DSCR = Net Operating Income (NOI) / Debt Service

• A DSCR of 1.0 means the property brings in just enough income to cover the mortgage.
• A DSCR above 1.0 means the property generates more income than needed—great for lenders.
• Most lenders look for a minimum DSCR of 1.2, though some may go lower depending on the deal.

🏘️ Why Investors Love DSCR Loans

• ✅ No personal income verification – perfect for self-employed or full-time investors.
• ✅ Faster approvals – less paperwork, more deals.
• ✅ Scalable – ideal for building a portfolio of cash-flowing properties.

⚠️ Things to Watch Out For

• Higher interest rates than conventional loans
• Larger down payments (often 20–25%)
• Property must cash flow well—no fixer-uppers unless already stabilized

🧠 Pro Tip

Before applying, run your numbers carefully. Use conservative rent estimates and factor in all expenses. A strong DSCR not only gets you approved—it gives you peace of mind.

Have you used a DSCR loan in your investing journey? Share your experience below! 👇