A DSCR loan is a mortgage used to purchase an investment property and stands for Debt Service Coverage Ratio. It requires no income verification from the borrower because the property itself generates the income. Traditionally, lenders want to see that the market rent for the property is greater than or equal to the total housing payment of the property. However, some lenders are willing to finance a property where the market rent is less than the total housing payment if additional mitigating factors exist, such as, higher equity and greater reserves. Normally, lenders require a minimum of 20% down payment, although some are willing to finance with as little as 10% down.

This loan can be issued under the borrower’s personal name or the name of their business with the borrower serving as the guarantor. You can use it to purchase any type of residential property or to get cash out of the equity of an existing investment property through a DSCR cash out refinance.