How to Get DSCR Loans for Airbnb? 5 Easy Steps

With DSCR loans, you can use Airbnb income to qualify for the loan. Learn the requirements and how to apply for this financing option to kickstart your Airbnb.

DSCR loans for airbnb

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Have you ever considered using your investment properties to generate income through Airbnb? If so, you may wonder if you can qualify for a loan. The good news is that options are now available specifically for investors who want to use their properties for short-term rentals. This type of loan is called a DSCR loan, and it can help you finance your investment and get started in the Airbnb market.

DSCR, or Debt Service Coverage Ratio, is a key factor in securing a loan for an Airbnb property. If you’re thinking of investing in an Airbnb rental, it’s essential to understand how DSCR works and what lenders are looking for.

This blog post will explain everything you need to know about DSCR loans for Airbnb investors. Stay tuned for more tips and advice on real estate investment!

What Is Debt Service Coverage Ratio?

The Debt Service Coverage Ratio, or DSCR, is a metric used to assess how much cash an entity has to pay for its debt obligations. The ability of the borrower to service or repay the annual debt payment equal to the amount of Net Operating Income (NOI) produced by the asset is measured by the debt service coverage ratio or DSCR. The more net operating income is available to repay the debt, the higher the DSCR ratio. 

The DSCR shows whether or not a piece of real estate is profitable enough to pay off the mortgage. When a real estate investor applies for a new loan or refinances an existing mortgage, the debt service coverage ratio is one of the criteria lenders use to determine the maximum amount available.

DSCR loan for Airbnb financing is one of the most popular and useful investment property loans. To qualify, your rental property must have a high DSCR. Lenders will also consider other factors such as credit score, income, and employment history.

DSCR Calculations

Understanding the DSCR calculation is crucial when considering a DSCR loan, especially for real estate investing. For DSCR loans, all lenders will take a look at this formula. Let’s review the numbers to see if your property generates enough cash flow to qualify for a DSCR loan. 

Debt Service Coverage Ratio (DSCR) Calculator

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Know the viability of your investment property with our DSCR calculator. Ensure you have the financial capacity to meet your debt obligations.

Earnings and Expenses 

Income is the main factor DSCR lenders consider. They then turn their attention to costs. 

They want to ensure that your income exceeds your total expenses. Mortgage payments, taxes, insurance, and HOA dues will all be examined. They don’t currently consider costs associated with property management, but this may change in the future. Let’s say our monthly rent is $1,000 for the purposes of this example. 

Let’s complete these figures for our hypothetical property:

DSCR Loan Formula

Consequently, $850 was spent overall on this property. Immediately, we can see that income exceeds costs and that this property generates $150 in cash flow per month. 

DSCR Formula 

Lenders will then use the following equation to calculate this cash flow:

Income ÷ Expenses = Cash Flow Rate

Or, in this case:

1000 ÷ 850 = 1.17+

Another formula to calculate DSCR is:

DSCR is calculated by dividing net operating income (NOI) by total debt service (TDS).

NOI is a property’s income after operating expenses are deducted before taxes, interest, depreciation, and amortization. Net Operating Income (NOI) is generally derived using EBITDA (earnings before interest, tax, depreciation, and amortization)

TDS is the sum of all periodic loan payments, including principal, interest, sinking funds, and lease buyouts.

For example, if a property had an ROI of $1,000,000 and an annual debt obligation of $850,000, it would have a DSCR of:

1,000,000/850,000 = 1.18 DSCR

Net Operating Income= Revenue − COE

COE = Certain Operating Expenses

Total Debt Service = Current debt obligations

DSCR Ratio Formula

DSCR Loan for Airbnb Example:

A real estate investor may consider buying an Airbnb property with a gross rental income of $50,000 and an annual debt of $40,000. When you divide $50,000 by $40,000, you get a DSCR (Debt Service Coverage Ratio) of 1.25, which means that Airbnb generates 25% more income. Of course, this also means a positive cash flow in the lender’s eye.

Lenders are looking for a positive cash flow. They want properties with:

  • Bare minimum: One-to-one. This means your rent at least covers your costs. (Example: Rent is $1000, and your monthly expenses on the property are $1000).
  • Better: 1+
  • Best: 1.25+

What is DSCR Loan For Airbnb?

The DSCR loan is intended for Airbnb investors and mortgage brokers who prefer to qualify for a mortgage using the cash flow produced by their short-term rental property rather than documentation of their income, such as tax returns, employment records, etc. 

Lenders use DSCRs to help Airbnb property buyers qualify for loans because they can quickly determine a borrower’s ability to repay without requesting proof of income to qualify. In addition, a standard loan may not be available to some real estate investors because they deduct costs from their properties.

Since they are not required to provide any income verification in the form of tax returns or pay stubs—which investors either don’t have or don’t accurately reflect their real income due to write-offs and business deductions—the Airbnb real estate investors can qualify for the debt service coverage ratio loan more quickly.

DSCR Loans for Short-Term Rental Properties

A DSCR loan allows borrowers to use the market rent (actual or future, in some cases) of the Airbnb property to qualify rather than the borrower’s business income. This is especially beneficial for self-employed business owners or investors with many tax write-offs and minimal net income shown on their tax returns.

By using non-QM or DSCR (Debt Service Coverage Ratio) programs, which do not require borrower applicants to provide tax returns, W-2s, or other official income documents, many investors can now buy both short-term and long-term rentals.

For investors, the Airbnb market offers a lucrative opportunity. In the last three years, the number of short-term rentals has increased by 105%, and in some cities, investors can earn almost $7,000 per month on a single property. 

To qualify for a DSCR loan, borrowers need to provide the following:

  • The address of the property that will serve as collateral
  • The purchase price or appraised value of the property
  • The amount of the down payment
  • The monthly mortgage payments (principal, interest, taxes, and insurance)
  • The monthly HOA dues (if any)
  • The projected short-term rental income
  • The vacancy rate (usually between 5% and 10%)
  • The estimated monthly expenses, such as repairs, maintenance, and property management fees

With this information, lenders can calculate the DSCR to determine if the borrower has enough income to cover the monthly mortgage payments.
If you have a DSCR ratio of 1 or more, you can qualify for the DSCR loan for Airbnb or other short-term rental property.

So, get in touch with a DSCR lender to apply for a DSCR loan and finance your Airbnb.

HomeAbroad specializes in DSCR loans, offering the most competitive terms and swift approvals. Get your rate quote today!

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No Ratio Loan in the Short-Term Rental Market

A DSCR loan in itself, a No-Ratio loan simply means that your debt-to-income ratio is not factored into the decision to approve your loan. This can be a good option for borrowers who have a job with low income or are self-employed with write-offs.

For short-term rental investors, a no-ratio loan can be a good option because it allows you to use the rental income from your property to qualify for the mortgage. This can be especially beneficial if you have a lot of tax write-offs and minimal2 income.

Loan options allow you to finance a property through an LLC or corporation without worrying about personal debt-to-income ratios. This is great for self-employed people or investors who want to buy multiple properties.

Short Term Property Loans for Airbnb’s

Pursuing short-term rental loans for your Airbnb property can be a great way to generate extra income – but you’ll need to find the right type of financing first.

A short-term rental loan is a specific type of investment property loan that:

1. Provides financing for the purchase or refinance of a property.

2. That will be a short-term rental (for less than 30 days).

3. And has a loan term of one year or less.

Short-term rental loans are typically harder to qualify for than traditional investment property loans because they are considered a higher risk, and there is fewer data available to assess the potential profitability of the property.

As a result, lenders will often require a higher down payment – typically 20-30% – and charge a higher interest rate.

Qualifications Required for Airbnb DSCR Loans

The rental income from the Airbnb properties must meet or exceed the lender’s coverage ratio requirements to qualify for a DSCR loan. The monthly rental income is divided by the mortgage payment to determine the coverage ratio, which varies depending on the lender and borrower. It typically ranges between 1.0 and 1.5. 

For instance, if the lender’s debt service coverage ratio is 1.0x and the Airbnb brings in $5,000 monthly rent, the maximum mortgage payment is permitted. When the DSCR is 1.5x, the maximum mortgage payment is $3,333. The mortgage rate and program determine how much you can borrow.

Because eligibility for a DSCR mortgage is based more on the rental income generated by the property than your personal income, the application process is streamlined and may take less time than a standard investment property mortgage. 

The DSCR program is a good option for real estate investors who want to purchase or refinance an investment property but lack the required personal income or don’t want to provide their tax, financial, and employment records.

Here are the other criteria you need to meet to get the DSCR loan for Airbnb.

  • Credit Score 620 or higher
  • DSCR ≥ 1
  • Down payment: 20-25%

Step-By-Step Application Process of DSCR Loans for Airbnb

Here we outlined the steps involved in the DSCR loans for short-term rental properties.

Step 1: Find the DSCR Lender

You need to find the best DSCR lender that aligns with your terms and is best for your property case. You should shop around to compare multiple DSCR lenders and compare their rates to choose the best one for you. HomeAbroad specializes in DSCR loans, offering the most competitive terms and swift approvals. Get your rate quote today!

Step 2: Submit the Application

Once you select the lender, they’ll ask you to submit the application for the loan, and you don’t have to submit any financial documents like traditional mortgages.

Step 3: DSCR Calculation

After the DSCR loan application submission, your lender will calculate your DSCR through the property evaluation.

Step 4: 1007 Rent Schedule

Your lender will order the 1007 rent schedule with the standard property appraisal stage to know the fair market rent of your property and calculate the potential income you can generate from the Airbnb you are buying.

Step 5: Approval

If you manage to get the DSCR ratio your lender prefers, which is 1 or more in general, you’ll get the approval, and you can move forward with your Airbnb buying process.

Why a DSCR Loan for Airbnb is a Great Option for Real Estate Investors?

A DSCR loan is a good alternative to financing a property without having to disclose your earnings. Rather use the cash from your home. Airbnb income is used instead to qualify for the loan, which makes it a great option if you’re self-employed or have a complicated financial situation. No personal income is required to qualify. This saves you from submitting complicated income statements and tax returns.

It’s also a good choice if you’re looking to buy an investment property quickly, as the process is generally faster than traditional financing. And since these loans are asset-based, they tend to have more flexible underwriting guidelines than other types of loans. Investors can borrow money through cashflow loans for a short-term investment. This loan is usually short, and the lender must pay interest only after repaying its debts.


Having a debt-service coverage ratio loan makes life much easier for property investors. Investors can qualify for the loan by using future rental income from the home they’re buying. Using the property’s income potential instead of relying on documented past income streamlines loan approval.

This type of loan is also great for self-employed people or with complicated financial situations. If you’re looking for a fast and flexible way to finance your investment property, a DSCR loan may be the right choice.

Frequently Asked Questions

Q1. Are there any hurdles with using DSCR for Airbnb financing?

You might face some issues with utilizing average rental rates 
A lender typically requires a two-year history of the property’s expenses and rent to refinance an Airbnb. 
A DSCR loan might be an option for your short-term rental if you cannot provide that. However, you must use the typical rental rates for a typical rental property in that area to qualify for the DSCR loan. You cannot use your Airbnb rates as the income for the property unless you have a long history. 
This could be a huge obstacle. 
A property that generates income from short-term rentals (such as Airbnb,.) likely generates more revenue than a typical monthly rental in the same neighborhood. The monthly income from Airbnb can be three to four times higher than the area’s average rent. But a DSCR will require you to use the number for standard rents. So it’s possible that even though your short-term rental is cash-flowing, it might not qualify for a DSCR loan.

Q2. How do I determine if my rental property is eligible for DSCR financing?

To qualify for DSCR financing, your property must generate enough rental income to cover the loan payments. The monthly mortgage payment must be less than or equal to the monthly rent. In other words, your debt-service coverage ratio (DSCR) must be 1 or higher.

Q3. Why is DSCR Important?

DSCR (Debt Service Coverage Ratio) is an important financial metric used to assess the property’s cash flow and its ability to generate sufficient income to cover its debt obligations. Hosts need to maintain a healthy DSCR to ensure they can repay any loans they have taken to finance their properties.

Q4. How can I improve my DSCR?

The easiest way to improve your DSCR is to invest more money, but you can also buy insurance, fight annual property taxes, and charge more rent. Allowing pets or including extra amenities like a washer and dryer are easy ways to increase your rent. To improve your DSCR, you need to increase your net operating income or reduce your debt service payments.

Q5. Can you use a DSCR loan for an Airbnb?

Yes, you can use a DSCR loan to finance your Airbnb property. However, you will need to use the typical rental rates for a typical rental property in that area to qualify for the loan. You cannot use your Airbnb rates as the income for the property unless you have a long history.
To know more, refer to this guide and in case of any more questions, feel free to contact HomeAbroad, and we’ll be happy to assist you!

Q6. Can I use Airbnb rental income to qualify for a mortgage?

Yes, you can use Airbnb rental income to qualify for a mortgage. However, you will need to provide a two-year history of the property’s expenses and rent to refinance an Airbnb. A DSCR loan might be an option for your short-term rental if you cannot provide that. Contact HomeAbroad for more information.

About the author:
Amresh is the Founder & CEO of HomeAbroad. With over 14 years of mortgage industry experience, he specializes in foreign national mortgages and Non-QM mortgages. He is also a licensed mortgage originator (NMLS # 2549148).

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