DSCR Loan Requirements

What You Need to Qualify for a DSCR Loan

DSCR loans are designed for real estate investors who want to qualify based on rental property income rather than personal income. Because there are no W-2s, tax returns, or DTI ratios involved, the qualification criteria focus on four things: the property's cash flow, your credit score, your down payment, and the property type. Here's exactly what lenders look for.

DSCR Loan Requirements at a Glance

Requirement	Typical Range	Notes
Minimum DSCR	0.75 – 1.25	1.0+ is standard; 0.75 available with higher down payment
Credit Score	660 – 720+	660 minimum at most lenders; 720+ for best rates
Down Payment	20% – 30%	20-25% standard; 25-30% for sub-1.0 DSCR or lower credit
Interest Rates	7.0% – 9.5%	1-2% above conventional; varies by LTV, credit, and DSCR
Loan Amount	$75K – $3M+	Most lenders cap at $1.5-2M; jumbo programs available
Property Types	1-4 units, condos, townhomes	Some lenders allow 5-8 units, mixed-use, and STR
Loan Terms	30-year fixed or 5/6 ARM	Interest-only options available at some lenders
Cash Reserves	3 – 12 months PITIA	Higher reserves required for lower DSCR or credit
Seasoning	None – 6 months	Cash-out refi typically requires 6 months ownership
Prepayment Penalty	1 – 5 years	Common on DSCR loans; buydown options available

Credit Score Requirements

Your credit score is the second most important factor after the DSCR ratio itself. Here's how credit score tiers affect your DSCR loan terms:

Credit Score	Rate Impact	Max LTV	Availability
740+	Best rates available	Up to 80%	All lenders, all programs
720 – 739	+0.125 – 0.25%	Up to 80%	Most lenders, most programs
700 – 719	+0.25 – 0.50%	Up to 75-80%	Most lenders
680 – 699	+0.50 – 0.75%	Up to 75%	Many lenders
660 – 679	+0.75 – 1.25%	Up to 70-75%	Select lenders
620 – 659	+1.5%+	Up to 65-70%	Limited programs

Down Payment Requirements

DSCR loans require larger down payments than conventional owner-occupied mortgages because they're investment property loans with no personal income verification. The standard range is 20-25%, but your actual requirement depends on your DSCR ratio, credit score, and property type.

20% down is available for borrowers with strong credit (720+) and DSCR above 1.25 on standard 1-4 unit residential properties. 25% down is typical for most DSCR borrowers with credit scores of 680-720 and DSCR between 1.0-1.24. 30% down may be required for sub-1.0 DSCR programs, credit scores below 680, or non-standard property types like condotels or rural properties.

DSCR Ratio Tiers

The DSCR ratio itself determines which loan programs you're eligible for. Most lenders structure their offerings in tiers:

DSCR 1.25 and above opens the widest selection of lenders, the best rates, and the most favorable terms. This is the target most experienced investors aim for when evaluating deals. DSCR 1.0 to 1.24 qualifies for standard DSCR programs at slightly higher rates. The property covers its debt but has thin margins. DSCR 0.75 to 0.99 means the property doesn't fully cover the mortgage from rental income alone. Some lenders still offer programs here, but expect 25-30% down, higher rates, and cash reserve requirements of 6-12 months. Below 0.75 disqualifies the property from most DSCR programs. Consider conventional financing, portfolio loans, or restructuring the deal.

Interest Rates for DSCR Loans

DSCR loan rates run higher than conventional mortgages because they carry more risk for lenders - there's no personal income verification and the borrower may have multiple leveraged properties. As of early 2026, DSCR rates generally range from 7.0% to 9.5%, depending on several factors.

The primary rate drivers are your credit score, loan-to-value ratio, DSCR ratio, rate type (fixed vs. adjustable), and prepayment penalty term. Choosing a 5/6 ARM instead of a 30-year fixed typically saves 0.50-1.0% on the initial rate. Accepting a 3-5 year prepayment penalty instead of no prepay can save another 0.25-0.50%. These levers are worth considering for investors who plan to refinance or sell within 5-7 years.

Property Type Requirements

DSCR loans cover a range of property types, but each comes with slightly different requirements:

Single-family residences (1-4 units) are the most straightforward and universally accepted by all DSCR lenders. Condos and townhomes are accepted by most lenders but may require the HOA to meet certain financial health standards (reserve requirements, owner-occupancy ratios). 5-8 unit properties fall into a gray area - some DSCR lenders handle these, but many refer them to commercial loan programs. Short-term rentals (Airbnb/VRBO) are increasingly accepted but require 12-24 months of documented rental history and typically use 75-90% of trailing income. Mixed-use properties where the residential portion is 51%+ of the square footage may qualify with select lenders.

Cash Reserve Requirements

Nearly all DSCR lenders require cash reserves after closing - money in the bank that could cover mortgage payments if the property were vacant. The standard requirement is 3-6 months of PITIA (principal, interest, taxes, insurance, and association dues). For borrowers with lower credit scores, DSCR below 1.0, or multiple DSCR loans, reserves of 6-12 months are common. Reserves can typically be held in checking, savings, retirement accounts (counted at 60-70% of value), or stock portfolios.

Documents Needed for a DSCR Loan

One of the biggest advantages of DSCR loans is the simplified documentation. Unlike conventional loans requiring years of tax returns, pay stubs, and employment letters, DSCR loans typically require only: a completed loan application (1003), two months of bank statements, a credit report authorization, a signed lease agreement or rent roll for the property (or the lender will order a 1007 market rent appraisal), proof of insurance, property tax documentation, and entity documents if purchasing in an LLC.

That's it. No tax returns, no W-2s, no profit and loss statements, no employment verification. The entire underwriting process focuses on the property's ability to generate income relative to the debt, plus your creditworthiness and reserves.

How to Apply for a DSCR Loan

Step 1: Calculate your DSCR using our free calculator to see where you stand. Step 2: Get pre-qualified with a DSCR lender. This is usually a soft credit pull and takes 24-48 hours. Step 3: Submit your property under contract with the required documentation. Step 4: The lender orders an appraisal and 1007 rent schedule. Step 5: Underwriting reviews the file and issues conditional approval. Step 6: Clear conditions and close. Most DSCR loans close in 21-30 days from application.