- Landlord
- Tenant
DSCR Loans: Unlocking Cash Flow-Based Financing for Your Rentals, with Alex Bekeza
November 26, 2025
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Key Takeaways:
- DSCR loans qualify borrowers based on property income—not personal income—making them an attractive option for real estate investors who don’t meet traditional lending criteria.
- Your Debt Service Coverage Ratio (DSCR) is calculated by dividing a property’s gross rent by its PITI, and lenders use this figure to determine whether a property can cover its own debt obligations.
- To apply for a DSCR loan, borrowers should be prepared with specific documents—including lease agreements, insurance proof, LLC paperwork, bank statements, and more—to streamline approval and meet lender requirements.
For real estate investors, DSCR loans—non-traditional mortgage loans—are a great alternative to conventional financing. They are designed for those who want to qualify not based on personal income, but instead on a property’s cash flow. These loans allow you to avoid common barriers associated with conventional financing, like high rates and strict lending criteria, allowing for easier scaling of real estate portfolios.
During an exclusive webinar recently hosted on Innago Insight, we asked the most-rated loan officer on BiggerPockets, Alex Bekeza, for his expert input on this type of loan and how investors can take advantage of it. Curious what he had to say? Let’s get right into it.
What are DSCR Loans?
A DSCR loan (Debt Service Coverage Ratio loan) is a type of mortgage designed for real estate investors. Instead of qualifying based on your personal income, qualification is instead based on how much monthly rental income or annual rental income the specific property generates.
Bekeza emphasized a notable difference between DSCR rental loans and conventional loans: their reliance on private appetite in the secondary market. As Bekeza noted on our webinar:
“The big difference between these and conventional loans is that they rely on private appetite in the secondary market—like Wall Street, hedge funds, life insurance companies, and private note investors—as opposed to conventional financing, which is supported by government-sponsored entities, like Fannie Mae and Freddie Mac.”
As of 2025 according to Bekeza, DSCR loan rates have remained within the 6-8% range, depending on FICO score, location, property type, or transaction type. If Treasury yields rise due to inflation, economic shifts, or Fed surprises, DSCR rates will likely climb. Conversely, declines in Treasury yields have the potential to slightly lower DSCR loan rates.
How Do You Calculate DSCR?
Lenders utilize this ratio to see if the property’s rental income can cover the loan’s principal, interest, taxes, and insurance (PITI). The standard DSCR formula is below:
Gross Rent ÷ PITI = DSCR (Debt Service Coverage Service Ratio)
For example, if your monthly rent is $2,000 and your monthly loan payment is $1,500, your DSCR would be 1.33 ($2,000 ÷ $1,500).
If you’d like to calculate your DSCR, try out our free Debt Service Coverage Ratio calculator.
Who are DSCR Loans For?
DSCR loans are a great tool for capitalizing on new real estate investment opportunities. From long-term to short-term rentals, these loans allow borrowers to purchase different types of properties for different purposes.
“a very simple way to apply for a competitive 30-year fixed-rate mortgage without having to document any personal income.”
Below is a table to illustrate how DSCR loans differ from conventional loans:
| DSCR Loan | Conventional Loan | |
|---|---|---|
| Qualification Basis | Debt Service Coverage Ratio (rental income vs. expenses) | Borrower's personal income, debt-to-income ratio, employment history |
| Primary Use | Investment properties (rentals, short-term rentals, multifamily) | Owner-occupied homes, second homes, some investment properties |
| Income Verification | No tax returns, W-2s, or paystubs required | Requires full documentation of income (W-2s, paystubs, tax returns) |
| Credit Score | 660 minimum (680 minimum for max LTV) | 620-680+ minimum depending on program |
| Vesting | Personal name, LLC, or corporation | Personal name |
| Seasoning for BRRRR | Zero to 90 days | 12 months if there is a 1st position lien on property |
| Down Payment | 20-25% typically | 3-20% depending on program (FHA, conventional, jumbo) |
| Scalability | No cap on the number of properties owned | Max 10 financed properties or whenever DTI can no longer pass |
| Best for | Investors scaling real estate portfolios | Homebuyers or investors not needing the other perks above |
Bekeza pointed out a few things of note that are unique to DSCR loans. Firstly, “vesting,” which Bekeza notes is “a huge piece of why people are so attracted to DSCR loans.” He continues:
“The big perk is that we can use an LLC or corporation as the borrower as long as we have at least one personal guarantor who owns at least 25% of that company.”
On paper, the entity is the borrower, and these loans do not report to personal credit.
He additionally notes “seasoning,” or the length of time you’ve been on the title. Bekeza states:
“If you’re a fixed and hold investor like me, a BRRRR investor, it’s crucial that you’re working with a lender that has flexible seasoning requirements.”
Seasoning impacts the refinance stage of BRRRR. With conventional loans, seasoning requirements can delay the ability to assess capital and move forward. With DSCR loans, seasoning requirements are far less stringent, allowing for quick turnaround.
Finally, “scalability.” Bekeza mentions that if you plan to really scale a portfolio, that is, beyond 10 financed properties, you’re going to have to utilize DSCR loans. Fannie and Freddie will cap you at 10 properties—some lenders capping you at even less.
“With DSCR loans, there is no cap.”
Without a cap, DSCR loans allow you to scale your portfolio without the traditional constraints of conventional financing.
What Documents are Required for a DSCR Loan?
According to Bekeza, you’ll be a loan officer’s best friend if you have these materials readily available:
1. Signed purchase contract (purchases only)
A purchase contract covers the legally binding details and specifics of a real estate transaction between buyers and sellers, making it crucial to have on hand.
2. HUD/settlement statement from the acquisition
This statement is commonly used for loan agreements as it details the terms and conditions of the loan and all costs owed by or credits due to the buyer or seller.
3. Driver’s license of each LLC member title/holder
This is standard operating procedure for identity verification. Be sure that the driver’s license matches the name on any loan applications you fill out.
4. Lease agreement if occupied
If it’s a brand-new lease (within the last 60 days or so), you should be prepared to provide proof of the first month’s rent and security deposit. Not all DSCR loans require you to be leased, but they usually require either a lease or an active rent listing.
5. Proof of insurance
In any refinancing or purchase loan scenario, loan officers will reach out to your insurance agent to confirm that your policy matches lender requirements. For this process, be sure to consult your agent to be sure that you not only match lender requirements, but also that you have six months’ rent loss coverage. This coverage will likely be asked for further down the road.
6. Payoff demand information
If you have a loan on the property, you can provide your lender either your most recent mortgage statement or contact information to order the payoff demand.
7. Property management agreement (if applicable)
A property management agreement is a contract between the management firm and the property owner, outlining how the company will run the property’s daily operations. If you have a property manager, this agreement is good to have on hand.
8. Scope of work completed (for refinances owned less than 12 months)
This is if you’re doing a BRRRR or you’ve made any major renovations in the past 12 months. A simple one-pager that itemizes what you’ve done (exterior paint, new flooring, etc.) is good to have on demand when refinancing or ordering an appraisal in general.
9. 2 months of recent bank statements (reserves)
These recent statements allow lenders to assess your financial health and see that your reported income is consistent and reliable.
10. Most recent HOA statement (if applicable)
If you have an HOA, the lender will likely need the HOA statement. An HOA adds an additional aspect to calculating your DSCR and determining your qualification—not just the simple division of rent by PITI.
11. Voided check for ACH set up
Most lenders will require ACH to be set up at closing. It’s good to have a voided check on hand far ahead of time.
12. LLC Documents
Below are some necessary LLC documents:
- Articles of organization
- Operating agreement
- EIN letter
- Certificate of Good Standing
- Certificate of Foreign Qualification (if applicable)
If the state the property is located in is different than the state of formation, then you’ll need a Certificate of Foreign Qualification. This certificate is mainly required to be sure that there’s not another company with the same name in the state. If you’re planning on getting financing for a rental in a different state from which your LLC was formed, it’s recommended to acquire this certificate early on in the process.
Conclusion
A clear understanding of what DSCR loans are and how to qualify empowers investors with a different financing option, increasing accessibility and allowing you to expand your rental portfolio to reach your investing goals.
If you want DSCR loans explained more in depth with expert insight, be sure to check out our exclusive webinar on Innago Insight.
Curious to know your DSCR mortgage rate? Try out Bekeza’s comprehensive mortgage rate calculator.
FAQs
What is the minimum DSCR?
There are all types of ways to look at this. There are programs, depending on your FICO score, that might require a 1.15, but most of the time you’re looking at a 1.0.
Are DSCR loans available for commercial properties like RV parks and mobile home parks?
No. DSCR loans are somewhat limited to one-to-four unit, but also five-to-eight unit, multifamily residential properties—not mixed use or commercial.
Does the property have to be an LLC?
No, it doesn’t have to be. There are a handful of states that have specific requirements, but in most cases, the property doesn’t have to be an LLC.
What if the income comes from a short-term rental? Can I still DSCR?
Yes. There’s a variety of ways to look at this. Short-term rentals will typically be a quarter or so higher in rate than a long-term rental if you’re using an alternative income method. A short-term rental with a longer operating history (at least 12 months of documented revenue stream), will usually get you better rates.
Do IRA accounts count as reserves?
Yes. Loan officers can look at different types of retirement accounts. However, the underwriter will likely take into consideration any kind of penalties or fees associated with making a draw on that type of account and will judge the assets accordingly.
Does crypto count as reserves?
No. There aren’t any known lenders that allow crypto to be eligible reserves. However, crypto could be considered viable reserves in the future.
Can I use a DSCR loan for a new property purchase that’s never been rented?
Yes, you can use it for a purchase. The only stipulation is that the property must be rent-ready—it can’t be in unlivable condition.
What is the minimum down payment required for DSCR? Any options to go below?
20% is the typical minimum. There aren’t usually any options to go below. Anything below 20% usually comes with all kinds of strings attached.
Which FICO score is looked at? The mortgage score? The middle of the three?
Lenders typically use a 3-bureau credit report. This report gathers scores from TransUnion, Equifax, and Experian—using the middle of those three as your score. This is a bit different from your vantage score, which puts more emphasis on consumer debt and balances. If you’re in a partnership, lenders will use the higher score of the two partners’ FICO for qualification.
