A DSCR loan is a business-purpose rental-property loan in which underwriting focuses heavily on whether qualifying rent covers the property’s principal, interest, taxes, insurance, and association dues. Personal income may not be used in the conventional way, but the lender still reviews the borrower, entity, credit, assets, reserves, appraisal, and property.
The basic formula
A common residential-investor version is qualifying monthly rent divided by monthly PITIA. A result of 1.00 means the qualifying rent equals the measured housing payment. Lenders may use different rent sources and expense treatments, so always confirm the program formula.
What affects approval
The ratio is only one part of the file. Credit, LTV, reserves, loan size, property type, occupancy, market, appraisal, entity, experience, and prepayment terms can all affect options.
Questions to ask before choosing a loan
Ask how rent is determined, what is included in the denominator, whether short-term rental income is eligible, how the prepayment penalty works, what reserves are required, and what happens when DSCR falls below a pricing threshold.
What to do next
Use the numbers and documents from this guide to prepare a complete scenario. Final eligibility and terms depend on the lender’s current program, underwriting, property, borrower, business, and state.