DSCR Loan Requirements: Qualification Criteria

Are you tired of traditional banks demanding W-2s and tax returns, only to deny your investment property loan based on your personal debt-to-income ratio? You're not alone. The traditional mortgage process was built for homeowners, not investors. What if your property's rental income could qualify you?

Enter the Debt Service Coverage Ratio (DSCR) loan, which is a game-changing no income verification loan for real estate investors. This guide breaks down the DSCR loan requirements for and explains how to qualify, whether you're purchasing your first rental property or expanding an existing portfolio.

At theLender, a specialized non-QM lender that has funded over $3 billion in DSCR loans since 2019, understands how to help investors like you build wealth through real estate. This guide outlines the criteria which include credit scores to property types that we use to evaluate your opportunities. For investment property financing, your rental income should be your qualification.

What is a DSCR Loan?

If the property's expected rental income equals or exceeds the total mortgage payment, the property cash flows and the loan qualifies. We focus on the property's performance, not your paystubs. A Debt Service Coverage Ratio (DSCR) loan evaluates your loan application based on the investment property's ability to generate enough rental income to cover its mortgage payments.

The formula is straightforward:

DSCR = Gross Rental Income / PITI

Where:

Gross Rental Income: The total monthly rent collected or projected from the property.
PITI: The Principal, Interest, Taxes, and Insurance of the proposed mortgage payment

For example, if a property is projected to rent for $3,000 per month and the total monthly PITI is $2,500, the DSCR is 1.2 ($3,000 ÷ $2,500). Since this ratio is greater than 1.0, the property generates more income than it costs, making it a strong candidate for a DSCR loan.

This approach contrasts with conventional loans that rely on personal Debt-to-Income (DTI) ratios, W-2s, and tax returns. Instead of your personal financial complexity, DSCR loans are built for investment property financing by evaluating deals based on their merit, not your personal income documentation.

DSCR Loan Requirements for at theLender

The DSCR calculation is the heart of the loan, but several other factors determine your eligibility and loan terms. Here are the DSCR loan requirements you'll need to meet at theLender in.

1. The DSCR Ratio

The DSCR ratio is the foundation of your loan qualification. A ratio of 1.0 means the rental income covers the mortgage payment. Higher ratios translate to better interest rates and terms.

At theLender, we offer two flagship programs for different investment scenarios:

NONI: For properties with a DSCR of 1.0 or greater, ideal for cash-flowing properties from day one.
NearNONI: For properties with a DSCR between 0.75 and 0.99, ideal for high-appreciation markets that may not cash flow immediately but offer strong long-term value.

This flexibility means you're not locked out of financing just because a prime location property isn't immediately cash flow positive.

2. Credit Score (FICO)

For most DSCR loan programs, we require a minimum FICO score of 640. However, we use the highest mid-FICO score among all borrowers. If you're applying with a partner or spouse and one of you has a stronger credit score, we use that to get you the best terms and rates.

This approach acknowledges that real estate investment is often a team effort. We want to reward strong credit partnerships rather than penalize them.

3. Down Payment and Loan-to-Value (LTV)

Our LTV requirements offer competitive financing options:

Purchase Transactions:

Up to 85% LTV on loans up to $1 million
Competitive LTVs on higher loan amounts with adjustments based on property type and borrower profile.

Cash-Out Refinances:

Maximum LTVs depend on DSCR, FICO score, and loan size.
No ownership seasoning required. This is a major advantage for investors who recently acquired properties.

Rate & Term Refinances:

In most cases, up to 85% LTV.
Streamlined process for investors to improve loan terms.

The no seasoning requirement on cash-out refinances is valuable for active investors wanting quick access to their equity for more acquisitions.

4. Eligible Property Types

DSCR loans accommodate various investment property types:

Single-Family Residences (SFR)
2-8 Unit Properties
Warrantable and Non-Warrantable Condos
Townhomes
Properties on up to 20 acres with no LTV reduction
Properties with up to 3 Accessory Dwelling Units (ADUs)

DSCR loans are for rent-ready properties and cannot be used for active rehabs, construction projects, or fix-and-flip strategies. The property must be rentable at closing.

5. Loan Amount and Structure

We offer DSCR loans up to $3.5 million, with multiple term options to match your investment strategy:

30-Year Fixed: Traditional amortization for predictable payments
40-Year Fixed with Interest-Only Option: Lower monthly payments to maximize cash flow
7/6 Adjustable-Rate Mortgage (ARM): Lower initial rates with adjustment after seven years

This variety lets you structure your financing to align with your cash flow goals and market outlook.

6. Cash Reserves

Lenders need to see a financial safety net to cover payments during vacancies or unexpected expenses. You should show 3-6 months of the total PITI payment in verifiable accounts. The exact requirement depends on factors like loan size, credit score, and number of financed properties.

Another advantage is that no sourcing is required for large deposits, which simplifies the documentation process compared to traditional lenders who scrutinize every deposit and transfer.

Financing for STRs and Complex Portfolios

Meeting the basic requirements is one thing. Securing financing that understands your investment strategy is another. This is where theLender stands apart, especially for STR investors or those looking to scale with multiple properties.

Unlocking Your STR Income Potential (Airbnb & VRBO)

Many lenders struggle to underwrite vacation rental loans due to variable, platform-dependent income. We've built our process to maximize your qualifying income from Airbnb and VRBO through four distinct calculation methods:

AirDNA Reports: We accept annualized 12-month projections from AirDNA, applying a standard 20% expense factor. We seek a market score of 60+, though exceptions can be made for exceptional properties or markets.
Rental History: Provide 12 months of documented income from your existing short-term rental to establish a reliable average income baseline.
Appraiser-Driven Analysis (Form 1007): A traditional approach where the appraiser provides projected market rents calibrated for short-term rental income potential.
theLender's Alternative STR Analysis: Our proprietary method where an appraiser uses a simplified grid to determine market rent based on daily rates and occupancy patterns, providing fast and accurate valuations.

If the initial rent projection is lower than expected, we offer a rebuttal process where you can provide additional market data or comparable properties to support higher income projections.

Building Your Portfolio

First-Time Investors Welcome: You don't need to be a seasoned landlord to qualify for most of our DSCR programs. We welcome first-time investors ready to build wealth through real estate investor loans.
No Limit on Financed Properties: While many lenders cap you at 4 or 10 properties, we have no limit on the number of properties you can finance with us. Properties beyond your fourth may require a board review, but there's no ceiling on your growth.
"theBlanket" Portfolio Loan Program: Our "theBlanket" portfolio loan program allows investors looking to consolidate existing properties or expand efficiently to finance 3 to 25 properties under a single loan. This approach simplifies property management, reduces paperwork, and unlocks equity across your portfolio. The program includes flexible partial release options for selling individual properties.

Easy Vesting and Asset Protection

Smart investors understand the importance of proper entity structuring for liability protection and tax advantages. We accommodate sophisticated ownership structures including:

LLCs (including layered structures)
S-corporations and C-corporations
Partnerships
Trusts

Key advantages of our entity lending:

A personal guarantee from the principals is required, and this is standard in the industry.
We allow layered LLC structures for maximum flexibility.
A 25% ownership stake is required on the loan, offering advanced flexibility for sophisticated investors with multiple partners or complex ownership arrangements.

Application Process: From Inquiry to Closing in 30 Days

We've streamlined our process for speed and clarity. You won't get lost in a corporate shuffle with a single point of contact from start to finish. Here's what to expect:

Step 1: Get Pre-Approved (24 Hours)

Submit your property information through our streamlined system for a free rate quote and pre-approval, often within 24 hours. This gives you the confidence to make competitive offers knowing your qualification amount.

Step 2: Submit Your Application

Our online platform makes it easy to upload necessary documents, focusing on property details and your entity documentation if applicable and not extensive personal income verification.

Step 3: Appraisal & Underwriting

We order the appraisal and our expert underwriters review your file, focusing on the property's DSCR and your qualifying criteria. Your loan officer and account manager keep you informed throughout.

Step 4: Close Your Loan

Once approved, we coordinate with the title company to finalize your loan closing, usually within 30 days of application. You're now the owner of a cash-flowing investment asset.

FAQ about DSCR Loan Requirements

Q: Are DSCR loan interest rates higher than conventional loans?

A: Interest rates on DSCR loans can be higher than conventional loans, as they are a specialized non-QM mortgage product. Our rates are competitive, and the benefits such as faster closing times, no personal income verification, unlimited property financing, and no lender fees often provide greater ROI for serious investors.

Q: Can I get a DSCR loan if I'm self-employed?

A: Absolutely. DSCR loans are ideal for self-employed borrowers, entrepreneurs, and business owners. We don't require tax returns, profit & loss statements, or personal income documentation, so your business income complexity doesn't affect your qualification. We focus exclusively on the property's rental income potential.

Q: Do you offer financing for foreign nationals?

A: Yes, we have specialized Foreign National DSCR programs for non-U.S. citizens and Non-Permanent Resident Aliens. These programs have specific documentation and visa requirements, but they open U.S. real estate investment opportunities to international investors.

Q: Can I use seller concessions for closing costs?

A: We offer generous seller concession allowances. These concessions can cover closing costs, prepaid expenses, and prepaid HOA dues, reducing your out-of-pocket expenses at closing.

Q: Are there lender fees with your DSCR loans?

A: We're proud to offer "NO LENDER FEES" on many DSCR products. This can save you thousands at closing compared to other lenders with origination, underwriting, and processing fees.

Conclusion

Qualifying for an investment property loan doesn't have to be a battle with underwriters over your finances. The DSCR loan requirements align with an investor's mindset: if the deal makes sense, the loan should follow. With flexible credit score criteria, diverse property types, and innovative income calculation methods that are especially beneficial for STR financing, the path to growing your portfolio is clearer than ever.

At theLender, we've built our business around investor-focused principles. We are the home of the NONI® loan, and our specialists are ready to help you finance your next rental property, whether it's your first or fiftieth. We understand that real estate investors need lenders who speak their language and structure loans around property performance, not personal income.