DSCR loan
Also called: debt service coverage ratio loan, investor cash flow loan
An investment-property loan qualified on the property’s rental income rather than the borrower’s personal income.
A DSCR loan underwrites the asset. The lender compares the property’s rent against the payment obligation, and qualifies on that ratio instead of tax returns and personal debt-to-income.
That makes it useful for self-employed investors and for borrowers whose returns understate cash flow. It generally prices above a full-documentation loan and asks for more down payment and reserves.
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Related terms
- DSCR (Debt Service Coverage Ratio)Net operating income divided by annual debt service: how many times the property covers its own loan payment.
- NOI (Net Operating Income)Income after operating expenses but before debt service, taxes on income, and capital expenditures.
- Cash flowWhat remains each month after rent has covered operating expenses and debt service.
- Non-QM loanA mortgage outside the Qualified Mortgage rules, using alternative documentation such as bank statements or asset depletion.
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