Are you a real estate investor tired of being rejected by traditional lenders who don’t understand your business? Are W-2s and tax returns holding you back from scaling your rental portfolio? If you’re nodding your head, you’re not alone. Thousands of investors have discovered the power of DSCR loans, which is a mortgage product where the property’s rental income qualifies you.
At theLender, we’ve spent years perfecting this financing solution for investors like you. We created our flagship NONI and NearNONI DSCR programs to help investors build wealth through real estate, without the traditional paperwork headaches from banks. Since 2019, we’ve funded over $3 billion in investment property loans, and we know how to make your deals happen.
This guide covers everything about DSCR loans, including the basic qualification calculation to advanced strategies for STR properties and portfolio lending. By the end, you’ll understand why savvy investors choose DSCR loans as their preferred financing option and how theLender can help you build real estate wealth.
What is a DSCR Loan?
DSCR stands for Debt Service Coverage Ratio, representing a fundamental shift in how lenders evaluate your loan application. Traditional mortgages focus on your personal income through debt-to-income (DTI) ratios, while DSCR loans focus on the property’s income-generating potential.
Here’s the revolutionary concept changing real estate investing: If the rent potential equals or exceeds the mortgage payment, we can qualify the loan. Your property becomes the star, not your tax returns or employment history.
This approach makes sense for real estate investors. The property generates the income to service the debt, so that income should be the primary qualification factor. This is how commercial real estate has been financed for decades, and now this tool is available for residential investment properties.
Simplifying DSCR Calculation
The DSCR formula is straightforward, and understanding it is crucial for your success as an investor:
DSCR = Gross Rental Income ÷ PITIA
Let’s break down each component:
- Gross Rental Income: The total monthly rent the property can generate based on current market conditions.
- PITIA: Total monthly mortgage payment including Principal, Interest, Taxes, Insurance, and Association/HOA dues.
Here’s a practical example:
Example: A property has a market rent of $3,000 per month. The total monthly PITIA payment is $2,500.
Calculation: $3,000 ÷ $2,500 = 1.20 DSCR
Understanding these numbers is crucial:
- DSCR of 1.0 = The rental income exactly covers the mortgage payment (break-even).
- DSCR above 1.0 = The property generates positive cash flow
- DSCR below 1.0 = The property has negative cash flow but may still qualify.
Here’s where theLender stands apart: We offer DSCR ratio programs above and below 1.0. Our NearNONI product is designed for high-appreciation markets where properties might have a DSCR below 1.0 but offer excellent long-term investment potential.
Why This Matters: No W-2s, No Tax Returns, No Problem
The biggest breakthrough with DSCR loans is this: No personal income verification is required. That means no W-2s, no paystubs, no tax returns, and no employment verification calls.
Eliminating personal income documentation is a game-changer for several investor types:
- Self-employed entrepreneurs whose tax returns do not reflect their true cash flow
- High-net-worth individuals with complex income structures
- Retirees living off investments instead of traditional employment
- Foreign nationals without U.S. credit or employment history
- Seasoned investors aiming to scale quickly without personal income limitations.
The focus shifts to what matters most: the property’s ability to generate rental income and cover its mortgage.
Top 7 Reasons Investors Choose DSCR Loans
DSCR loans open doors that conventional financing slams shut. Here’s how theLender’s programs are engineered for your success:
1. Qualify on Property Cash Flow, Not Personal DTI
This is the foundation of our approach. Banks analyze your debt-to-income ratio and employment history, and we focus on the property’s income potential. This means a self-employed investor with fluctuating income can qualify for the same loan as a W-2 employee, provided the property cash flows appropriately.
2. Scale Your Portfolio Faster
Conventional lenders limit you to 4-10 financed properties, creating an artificial ceiling on your investment growth. theLender has no limit on the number of properties you can finance. Whether you’re buying your second rental or twentieth, we can grow with you. (Note: Portfolios with 4+ properties undergo a board review for risk management.)
3. Close an Entity (LLC, S-Corp, etc.)
Asset protection is crucial for serious investors, and we make it easy. You can close your loan in any business entity such as LLC, S-Corp, C-Corp, Partnership, or complex layered LLC structures. We require only 25% ownership in the entity, giving you flexibility in structuring your investments for tax and liability advantages.
4. Unlock Your Equity with a Cash-Out Refinance
Your existing properties contain trapped equity to fund your next acquisition. Our cash-out refinance program lets you pull this equity for business purposes, like acquiring more rental properties. Here’s a huge advantage: we require no ownership seasoning, meaning you can refinance a property immediately after purchase if market conditions are favorable.
5. Finance More Properties
We finance investment properties that traditional lenders often reject:
- Multi-family properties up to 8 units
- Condos (warrantable and non-warrantable)
- Townhomes in any market
- Rural properties up to 20 acres with no LTV reduction
- Properties in markets deemed “risky”
6. Recognize All Rental Income (Including STRs & ADUs)
Do you want to know about short-term rental income from Airbnb and VRBO properties? We have three methods to capture this income. We’ll count income from up to 3 Accessory Dwelling Units (ADUs) per property. We understand today’s investors are creative, and our underwriting reflects that.
7. Streamlined, Investor-Focused Process
We are investors financing investors. Our process is built for speed and efficiency:
- A single point of contact from application to closing
- 30-day typical closing timeline
- “NO LENDER FEES” on many DSCR products.
- Expert underwriters who understand investment properties
- Flexible guidelines that solve rather than create problems
Who is a DSCR Loan For?
Our DSCR programs are flexible because we know “not everyone’s needs fit in a box.” Here are the investors who thrive with our financing:
First-Time Real Estate Investor
You’ve been studying real estate investing and you’re ready to take the leap. You’re concerned that your primary residence mortgage or personal debt-to-income ratio will prevent you from qualifying for an investment property loan. With our DSCR programs, your personal DTI becomes irrelevant. We welcome first-time investors on most programs, provided the property cash flows and you meet our other criteria.
The Experienced Investor Looking to Scale
You’ve managed rental properties for years, but you’ve hit the conventional loan limit and need a partner who can grow with you. Traditional banks say “no” after your fourth financed property, but that’s where we say “let’s get started.” Our portfolio programs, like theBlanket loan, are designed for investors in your situation who want to continue building their real estate empire.
The Short-Term Rental (STR) Operator
You own or want to buy properties for Airbnb, VRBO, or other short-term rental platforms. Traditional lenders either don’t understand STR income or refuse to count it. We are experts in STR financing and have developed methods to capture and verify your short-term rental income, ensuring you get full credit for your property’s earning potential.
The Self-Employed Entrepreneur
Your business generates substantial cash flow, but your tax returns don’t tell the full story due to depreciation, business write-offs, or fluctuations of entrepreneurial income. Our no-doc DSCR loans bypass this challenge. We don’t need to see your tax returns or verify your business income because the property’s rental income matters for qualification.
The Foreign National or Non-Permanent Resident
You live abroad and recognize the U.S. real estate market’s stability and opportunity. Most traditional lenders won’t consider foreign nationals, but we have specialized programs for international investors. We understand your documentation and have clear requirements to make U.S. real estate investment accessible.
How to Qualify: A Step-by-Step Guide to Your DSCR Loan
While we’ve eliminated the personal income paperwork that trips up most investors, there are still key qualification criteria for the borrower and the property. Here’s what we evaluate:
The Property: What We Finance
Eligible Properties:
- Single-Family Residences (SFR) in any market condition
- 2-8 Unit Multi-Family Properties (duplexes, triplexes, small apartment buildings)
- Condos (warrantable and non-warrantable)
- Townhomes in any market or HOA situation
Ineligible Properties:
It is important to set clear expectations. We do not finance:
- Owner-occupied properties (strictly for non-owner-occupied investment properties)
- Commercial or mixed-use properties
- Raw land or lot loans
- Active construction or major rehab projects (we’re not a construction or fix-and-flip lender)
The Numbers: DSCR, LTV, and Credit Score
DSCR Requirements:
We target a DSCR of 1.0 or higher for our standard NONI program, but our NearNONI program accommodates properties with lower ratios (as low as 0.75). This flexibility allows you to invest in high-appreciation markets where rents might not cover expenses initially, but the long-term potential is strong.
Loan-to-Value (LTV) Ratios:
- Purchase transactions: Up to 85% LTV on loans up to $1M
- Cash-out refinances: LTV varies based on DSCR, credit score, and loan amount.
- Rate-and-term refinances: Since you’re not pulling cash out, more aggressive LTVs are available.
Credit Score Requirements:
We use the highest mid-FICO score among all borrowers to help married couples or business partnerships qualify more easily. While exact credit requirements vary by program, most DSCR loans require mid-600s credit scores for the best rates and terms.
Borrower Requirements
Investment Experience:
Unlike some portfolio lenders, we welcome first-time real estate investors. You don’t need years of landlording experience to qualify for our programs.
Asset Reserves:
You’ll need to demonstrate liquidity through cash, stocks, retirement accounts, or other assets. The reserve requirement typically ranges from 2 to 6 months of PITIA payments, but varies by loan size and DSCR.
Personal Guarantee:
We believe in transparency. All our loans are full recourse and require a personal guarantee from the principals. This ensures that borrowers are committed to their investment’s success and provides us with the security needed to offer competitive rates and flexible guidelines.
The Application to Closing Process
Our streamlined process is designed for busy investors:
- Submit Property Information: Start your application online or speak with a loan officer to discuss your situation and goals.
- Receive Your Loan Estimate: Within 24-48 hours, you’ll have preliminary terms, rates, and a clear picture of your loan structure.
- Appraisal & Underwriting: We order the appraisal (focusing on rental income analysis) while our expert underwriting team reviews your file.
- Close in ~30 Days: We coordinate with you and your title company for a smooth, efficient closing that meets your timeline.
Maximizing Your Airbnb Income
Financing a Short-Term Rental (STR) with a traditional lender is nearly impossible because they do not know how to verify and value the income. At theLender, we have developed three innovative and flexible methods to ensure your property’s full Airbnb or VRBO potential is recognized and credited.
Method 1: The Enhanced Appraisal (Form 1007)
This isn’t your standard rental survey. We give specific instructions to our appraiser network to determine market STR rents, not traditional long-term rental rates. The appraiser analyzes comparable short-term rental properties in your area, considers seasonal variations, and provides a professional opinion of your property’s STR income potential. This method works well in established STR markets with good data.
Method 2: Data-Driven Projections (AirDNA)
We accept official AirDNA Reports, which provide market analysis and income projections for short-term rental properties. To account for vacancy, cleaning, and platform fees, we apply a conservative 20% expense factor to the annualized 12-month projection. We require a minimum market score of 60, though exceptions can be made for unique properties or markets.
Method 3: Our Proprietary Alternative STR Analysis
Our unique offering that many DSCR lenders don’t provide is this. Our appraisal partners complete a simplified but powerful analysis using a comprehensive comp grid. They research similar properties in your area, document daily rental rates and occupancy percentages, and provide a reliable income projection. This method has proven effective, especially in emerging STR markets with limited traditional data.
The Rebuttal Process: Your Safety Net
Here’s what sets us apart from other lenders: If an initial rental projection comes in lower than expected, we have a robust rebuttal process. You can submit additional comparable properties, provide your own market research, or we can order a second analysis from a different appraiser. We’ll use the highest valid figure available because we want your deal to succeed.
This investor-friendly approach has saved countless STR deals that other lenders couldn’t close. We understand you know your local market, and we’re willing to work with you to ensure the income analysis reflects reality.
DSCR Loans for Real Estate Portfolios
These are our core products for real estate investors. They offer competitive rates on loans up to $3.5M with zero personal income documentation. NONI is for properties with DSCR ratios above 1.0 (positive cash flow), while NearNONI accommodates properties with DSCR ratios below 1.0. NearNONI is ideal for high-appreciation markets focused on long-term growth rather than immediate cash flow.
The Power of Portfolio Lending: “theBlanket” Loan
This unique product lets you finance 3 to 25 properties under a single loan, simplifying your portfolio management. Key benefits include:
- Lower overall interest rates than individual property loans.
- Partial release options to sell one property without refinancing the entire portfolio
- Cross-collateralization can help weaker properties qualify with stronger performers.
- Simplified bookkeeping with one loan payment instead of multiple.
Learn about our theBlanket portfolio loan program and how it can streamline your growing portfolio.
Cash-Out Refinancing for Business
This tool lets you access trapped equity in your investment properties for business purposes such as:
- Acquiring more rental properties
- Major capital improvements that increase property value
- Building business reserves
- Exploiting new investment opportunities
No ownership seasoning is required, so you can refinance immediately after purchase if market conditions warrant it.
Commitment to the Global Investor
Our Foreign National DSCR program welcomes international investors with clear documentation requirements and competitive terms. We understand the challenges foreign investors face and have streamlined our process.
More Tools in the Toolbox
While DSCR loans are our specialty, we’re a full-service non-QM lender with products for unique situations:
- Bank Statement loans for self-employed borrowers to use business deposits as income verification.
- Asset Qualifier loans for high-net-worth individuals to qualify based on their investment portfolio.
- Loans for contractors and business owners, including 1099 Income loans and P&L loans
- Gig Qualifier products for the modern freelance economy
This suite positions theLender as your one-stop-shop for all non-traditional lending needs.
FAQ about DSCR Loans
Q: Are interest rates on DSCR loans higher than conventional loans?
A: DSCR loan rates can be higher than conventional mortgages, reflecting the increased flexibility and risk of not verifying personal income. However, our direct-lender model and “no lender fees” approach often result in a lower overall financing cost when factoring in all closing costs. Plus, the ability to close in an entity and scale your portfolio unlimited makes the higher rate worthwhile for serious investors.
Q: What is your minimum acceptable DSCR?
A: For our standard NONI program, an ideal DSCR is 1.0 or higher. Our NearNONI program is designed for properties with DSCR ratios below 1.0. In some cases, we can go as low as 0.75 DSCR, allowing investment in high-appreciation markets where current rents might not cover expenses but the long-term potential is strong.
Q: Can I use a DSCR loan to buy a home to live in?
A: Absolutely not. DSCR loans are strictly for non-owner-occupied, business-purpose investment properties. If you’re looking to buy a primary residence or second home for personal use, you’ll need a different loan program. Our loans are designed exclusively for rental properties and investment purposes.
Q: What are the common reasons a DSCR loan gets delayed or denied?
A: The common challenges we help investors navigate include:
- Appraisal issues: Low rent estimates or required repairs identified during the appraisal
- Title/vesting problems: Issues with entity documentation or ownership structure
- Asset verification: Difficulty documenting required reserves or down payment funds.
- Property condition: Inspection issues affecting rentability
Our single point of contact approach resolves issues quickly, and our experience helps us anticipate and prevent problems.
Q: Do you offer 30-year fixed rates?
A: Yes! We offer various loan structures to match your investment strategy:
- 30-year fixed rates for predictable payments
- 40-year fixed with interest-only options for maximum cash flow
- 7/6 ARM products for investors with shorter holding periods
- Most programs offer interest-only periods.
Use our DSCR Calculator to explore scenarios and see how different loan structures impact your cash flow.
Conclusion
Traditional lending wasn’t built for modern real estate investors. Banks still operate with outdated guidelines for homebuyers, not wealth-building investors who understand cash flow and appreciation create long-term financial freedom. DSCR loans represent a shift toward recognizing the property’s income-generating potential.
At theLender, we’ve funded over $3 billion in investment property loans since 2019 because we understand your rental income is your qualification. We’ve built our business around removing the barriers that traditional lenders place in front of ambitious investors. Whether you’re buying your first or fiftieth rental property, or investing in traditional rentals or short-term vacation properties, we have the experience, products, and investor-focused process to help you succeed.
Stop letting personal paperwork dictate your investment future. Your properties can pay for themselves, so use that income to build your wealth.