DSCR Loans: What It Is & How to Apply in [2025]

Key Takeaways:

1. DSCR loans focus on property’s income, not personal income, making them ideal for investors with non-traditional income sources or high DTI (Debt-to-Income) ratios if they already own investment properties. 

2. DSCR (Debt Service Coverage Ratio) is the ratio of gross rental income to PITIA (Principal, Interest, Taxes, Insurance, HOA).

3. Generally, to qualify for a DSCR loan, the property should make enough income to pay for its debt service, i.e., PITIA. 

4. Foreign investors can qualify for a DSCR loan without needing an established US credit history and personal income verification like pay stubs, W-2s, and tax returns.

Over the years, I’ve helped countless real estate investors secure financing tailored to their goals. One question consistently arises:  

How can I grow my portfolio without relying on my personal income or tax returns?  

The answer is DSCR loans, a financing tool specifically designed for international real estate investors. These loans prioritize the property’s rental income over the borrower’s personal financial profile, simplifying the approval process and enabling faster portfolio growth. 

Whether you’re a seasoned property owner or just starting your journey, this guide will provide you with everything you need to know about DSCR loans: how they work, who can benefit, and why they might be the perfect fit for your investment strategy. 

By the end of this article, you’ll not only understand the power of DSCR loans but also gain actionable insights to leverage them for your real estate goals. 

What is a DSCR Loan? 

A Debt Service Coverage Ratio (DSCR) loan is a specialized loan program tailored for real estate investors.  

Unlike traditional loans, DSCR loans qualify borrowers based on the property’s rental income rather than the borrower’s personal income or financial documentation. The key requirement is that the property’s income should be sufficient to cover the mortgage payments. 

Having worked with countless investors, I’ve seen firsthand how DSCR loans remove the barriers imposed by traditional financing methods.  

By focusing solely on the property’s cash flow, DSCR loans make it easier for investors to qualify for financing, enabling them to scale their portfolios without the constraints of personal income verification.  

This innovative approach simplifies the process and makes DSCR loans an ideal choice for: 

• Investors who want to separate personal finances from their investments. 
• Borrowers are seeking a streamlined approval process that requires minimal documentation. 
• First-time buyers, seasoned investors, and foreign nationals alike. 

While DSCR loans are gaining popularity, many people, including industry professionals, are unfamiliar with how they work and how to calculate the DSCR.  

Let’s break it down step by step.  

How Do DSCR Loans Work? 

Understanding how DSCR (Debt Service Coverage Ratio) loans operate is crucial for real estate investors seeking financing options that prioritize a property’s rental income over personal income verification.   

Here’s an overview of how DSCR loans function: 

1. Property Income Assessment  

Unlike traditional loans that heavily depend on personal income documentation, DSCR loans focus on the property’s income-generating potential. This approach allows investors to qualify based on the property’s cash flow rather than personal financial statements. 

2. DSCR Calculation 

The Debt Service Coverage Ratio (DSCR) is a key metric used in DSCR loans to determine whether a property generates sufficient income to cover its debt obligations.  

The formula is straightforward: 

DSCR Calculation: 

Net Operating Income (NOI), Capitalization Rate (Cap Rate), Cash on Cash Return (COCR), and Return on Investment (ROI) are not factors considered in qualifying for a DSCR mortgage loan. These metrics, while essential for evaluating property performance and investment potential, do not impact the eligibility criteria for DSCR loans, which focus solely on the property’s income relative to its debt obligations. 

Example of DSCR Calculation: 

If your property generates $72,000 in annual rental income and your total annual PITIA is $60,000: 

DSCR: $72,000 / $60,000 

DSCR = 1.2 

This means the property generates 20% more income than is needed to cover its debt, which is a positive indicator for lenders. 

Why It Matters: A DSCR greater than 1 signals positive cash flow, which increases your chances of loan approval. HomeAbroad simplifies this process by offering expert guidance tailored to your investment goals. 

At HomeAbroad, we make DSCR calculation easy with tools like our DSCR calculator, helping you determine your property’s eligibility and set clear financial goals.  

3. Qualification Criteria 

Typically, we prefer a DSCR of 1 or higher, signifying that the property’s rental income sufficiently covers its debt. 

However, at HomeAbroad, we offer flexible financing options for properties with DSCRs below 1 (no-ratio DSCR). This flexibility ensures that diverse investment needs are accommodated. Our DSCR loans are designed to qualify you based on a property's income potential. A standard DSCR loan works by ensuring the monthly gross rent is equal to or greater than the mortgage payment (PITIA), which means your DSCR is 1.0 or higher. This is the ideal scenario that qualifies you for the best terms.

However, we understand that not every property's rental income will meet this threshold, which is why we also offer our No-Ratio DSCR Program for properties with a DSCR between 0 and 1. With the No-Ratio program, you can still secure financing, although it will require a slightly larger down payment (a 5% reduction in LTV) and a higher interest rate. This option is ideal for investors with a strong long-term strategy who want to acquire properties that may not immediately generate a 1.0 cash flow ratio.

Let’s hear from Jay Thomas, a seasoned real estate agent, on the suitability of DSCR loans for investors. 

Jay Thomas – Real Estate Agent (Source: BiggerPockets Forum) 

4. Streamlined Application Process 

The application process for DSCR loans is designed to be efficient, with less emphasis on personal income verification and more on property performance. This results in faster approvals and a more straightforward path to securing financing. 

By focusing on the property’s income potential, DSCR loans provide a viable alternative for foreign national investors who may not meet the stringent requirements of traditional financing methods.  

At HomeAbroad, we are committed to offering tailored solutions that support your unique investment strategies. 

Michele Lawrie, 

Licensed Real Estate Professional, HomeAbroad

“Many of our clients come to us thinking traditional loan requirements limit them. Once we introduce them to DSCR loans and how we calculate the DSCR, it’s a game-changer. These loans make it easier for investors to focus on cash flow and grow their portfolios.”

Our expertise ensures that every global investor, whether seasoned or first-time, can fully leverage DSCR loans to achieve their financial objectives. 

You can check current DSCR loan interest rates and explore additional options through our dedicated DSCR loan hub at HomeAbroad, making it easier to secure financing that aligns with your investment strategy. 

How Can You Qualify for HomeAbroad’s DSCR Loan? The Requirements 

At HomeAbroad, we’ve tailored our DSCR loan requirements to provide flexible financing solutions for foreign investors.  

Whether you’re purchasing your first property or expanding your portfolio, our tailored criteria ensure that qualifying is straightforward and efficient. 

HomeAbroad’s No Ratio DSCR allows financing for properties with a DSCR less than 1, but with a higher down payment. These loans are perfect for properties that are not yet generating rental income or are in transition, focusing on the potential future cash flow. 

A Quick 7-Step Guide to Applying for a DSCR Loan 

1. Get Started with HomeAbroad  

Choosing the right DSCR loan lender is crucial. HomeAbroad specializes in DSCR loans, offering tailored loan terms to maximize your investment returns.  

With our proven track record of working with internationa real estate investors and our expertise in DSCR loans, we are committed to helping you achieve your real estate investment goals. Begin your DSCR loan journey with us.  

Not sure about us? Liam and Emma can vouch for us: 

You can read about Liam and Emma’s homebuying journey here. 

2. Meet with Our Mortgage Officers  

After you submit your details, our dedicated mortgage officer will promptly contact you and guide you through every step of the process. 

At HomeAbroad, we prioritize your investment success and are dedicated to providing personalized support tailored to your needs.  

3. Get Preapproval 

Submit basic financial information to get preapproved for a DSCR loan, giving you an idea of how much you can borrow based on your available assets for a down payment, reserves, and expected closing costs.  

4. Gather Your Documents and Fill Out an Application 

Collect necessary documents, including rental agreements, financial statements, and property details, and complete the loan application. 

Required Documents for DSCR Loans:  

• Property’s purchase contract  

• 2 Months’ Bank Statements 

• Appraisal 

• 1007 Rent Schedule 

• Homeowners Insurance 

• Entity Documentation (If buying under LLC)  

5. Underwriting 

To make a final decision, the underwriter will thoroughly evaluate your application and supporting documents in accordance with the lending guidelines.  

6. Approval 

The underwriter will either approve, decline, or accept your loan application with conditions.  

7. Closing 

After approval, our loan officer will provide a closing disclosure that contains your final loan terms, monthly mortgage payment schedule, and closing costs you are required to pay on closing day. Accept it and complete the necessary paperwork to receive the funds and take ownership of the property. 

By following these steps and meeting the outlined criteria, you can qualify for a DSCR loan and leverage its benefits to grow your real estate investment portfolio. 

Here’s what our Mortgage Officer, Steven Glick, has to say about DSCR Loans: 

Pros and Cons of DSCR Loans 

DSCR loans offer a unique financing option specifically tailored for real estate investors. Based on my experience working with a diverse range of clients, I have identified the advantages and potential drawbacks of DSCR loans, which will help you make an informed decision. 

Pros of DSCR Loans 

• No Personal Income Verification: One of the most significant advantages of DSCR loans is their focus on the property’s rental income rather than the borrower’s personal income. This means investors with complex financial situations or no W-2s can still qualify, making these loans highly accessible. 
• Get Multiple DSCR Loans Simultaneously: With no debt-to-income (DTI) ratio restrictions, investors can secure financing for multiple properties simultaneously, making portfolio expansion easier. 
• Fast and Streamlined Process: The approval process is faster since lenders focus on the property’s performance, reducing the need for extensive documentation and personal financial scrutiny. 
• Flexible Loan Options: DSCR loans accommodate a range of scenarios, including low DSCR ratios or properties with no current rental income, making them ideal for transitional properties. 
• Cash-Out and Refinance Options: Easily refinance existing properties or tap into built-up equity through cash-out refinancing to fund additional investments or renovations. 
• Versatility in Property Use: DSCR loans can be used for a variety of properties, including single-family rentals, multi-family units, and short-term vacation rentals, such as those on Airbnb. 

Cons of DSCR Loans 

• Higher Interest Rates: Since DSCR loans are considered non-QM (non-qualified mortgages), they often carry higher interest rates compared to traditional loans. This is the tradeoff for their flexibility and accessibility. 
• Larger Down Payments: Typically, DSCR loans require a down payment of 20–25%, which might be a barrier for first-time investors or those with limited capital. 
• Additional Closing Cost: Origination fees and other closing costs may be slightly higher for DSCR loans compared to conventional financing, reflecting the unique benefits they offer. 
• Risk with Low Cash Flow: For properties with lower DSCR ratios or inconsistent rental income, repayment risks may increase, especially during periods of high vacancy or unexpected expenses. 

DSCR Loan Success Story: How a UK Investor Achieved Their US Real Estate Goals 

Over my years of working with international real estate investors, I’ve seen firsthand the unique challenges they face when entering the US real estate market. However, at HomeAbroad, we specialize in turning these challenges into opportunities. 

One such success story is that of a UK investor who secured a DSCR loan to purchase a rental property in Florida.  

This case perfectly highlights how tailored solutions, expert guidance, and a deep understanding of DSCR loan flexibility can make all the difference for foreign investors. 

Overview: 

Client Profile 

Name: Sam Smith (name changed for privacy) 
Background: A UK citizen on an L1 visa with less than six months in the US and no US credit history. 
Objective: Purchase a $500,000 rental property in Sarasota, Florida, to generate steady cash flow and build a US real estate portfolio. 

Challenges 

No US Credit History: Sam faced multiple rejections from traditional lenders due to their lack of a US credit score, a common obstacle for foreign nationals. 
Low DSCR: The rental property had a DSCR below 1, which typically disqualifies it for traditional DSCR loan programs. 
Understanding US Financing Requirements: As a foreign national, Sam was unfamiliar with the US loan application process and documentation requirements. 

The HomeAbroad Solution 

HomeAbroad’s expert mortgage officer, Steven Glick, tailored the DSCR loan program to craft a perfect solution ideally suited to Sam’s needs: 

• Identifying the Right Loan Program: Recognizing the limitations of traditional lenders, our mortgage officer, Steven Glick, recommended a no-ratio DSCR loan, which does not require a specific DSCR for approval.  
• Customizing the Process: Steven simplified the application process for Sam by guiding them through every step, including understanding property performance metrics and submitting essential documents. 
• Efficient Underwriting: Despite the property’s low DSCR and Sam’s lack of credit history, our tailored approach ensured a smooth underwriting process, culminating in loan approval within 29 days. 

The Outcome 

With HomeAbroad’s support, Sam successfully purchased the $500,000 rental property under an LLC and secured the following loan terms:  

• Loan Amount: $341,000 

• Loan Type: No-ratio DSCR loan 

• Time to Close: 29 days 

Sam is now generating rental income from the property and has laid the foundation for an expanding US real estate portfolio. 

Why This Case Matters 

This success story underscores the flexibility and power of DSCR loans, particularly for foreign nationals. At HomeAbroad, our expertise in working with global investors ensures that challenges like a lack of US credit history or low DSCR don’t stand in the way of your investment goals.  

Ready to achieve similar success? 

Read the full case study here: How a UK Investor Secured a DSCR Loan. 

Get Started and Apply for a DSCR Loan Today

Debt Service Coverage Ratio (DSCR) loans have revolutionized real estate financing by eliminating the traditional hurdles of income verification and credit history. Instead, they focus on the property’s rental income potential, making them the ultimate tool for scalable and flexible investments.

With over 10 years of experience in helping global investors leverage DSCR loans, I can confidently say this financing strategy is a game-changer for building a strong US real estate portfolio. At HomeAbroad, we take pride in being at the forefront of DSCR lending, offering tailored loan solutions designed to meet the unique needs of international buyers and US newcomers.

But our support goes far beyond financing. As a one-stop PropTech and FinTech platform, HomeAbroad simplifies every aspect of purchasing and managing US real estate. Alongside DSCR loans, we provide:

• Now, you can use Ziffy.ai, our AI-powered investment property search platform, to find investment-ready homes.
• Access to 500+ expert US real estate agents for personalized guidance.
• Concierge services including LLC formation, US bank account setup, and homeowner’s insurance.
• Property management coordination to ensure your investments are stress-free and profitable.

Whether you’re a seasoned investor or just entering the US real estate market, HomeAbroad equips you with the tools, expertise, and ongoing support to succeed.

Ready to take your investments to the next level? Contact us today and let our experts guide you every step of the way. 

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Questions HomeAbroad Team Gets Asked By Investors Regarding DSCR Loan – FAQs

About the author:

Steven Glick is the Director of Mortgage Sales at HomeAbroad and has over a decade of experience in the mortgage industry. As a licensed mortgage originator (NMLS# 1231769), Steven brings deep expertise in loan processing, sales operations, and non-traditional mortgages.

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