DSCR Loans 2026: Real Estate Investor's Complete Guide
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DSCR loans let real estate investors qualify based on rental income — no W-2s, tax returns, or employment verification needed. Requirements: 1.0+ DSCR ratio, 680+ credit, 20-25% down. Rates from 6.50%. You can finance 1 to 100+ properties with no limit on the number of financed properties. Compare DSCR lenders →
How DSCR Works: The Formula
DSCR = Monthly Rental Income ÷ Monthly Mortgage Payment (PITIA)
PITIA = Principal + Interest + Taxes + Insurance + Association dues
0.75
Negative Cash Flow
Rent doesn't cover mortgage. Some lenders still approve.
1.00
Break Even
Rent exactly covers mortgage. Most lenders' minimum.
1.25+
Positive Cash Flow
Rent exceeds mortgage by 25%. Best rates unlocked.
Real Example
Property: $400,000 single-family rental in Dallas, TX
✓ This property qualifies for a DSCR loan with most lenders (1.0+ DSCR).
DSCR Loan Requirements 2026
| Requirement | Standard | Best Rate Tier |
|---|---|---|
| DSCR Ratio | 1.0 minimum | 1.25+ |
| Credit Score | 680 minimum | 740+ |
| Down Payment | 25% | 25-30% |
| Interest Rate | 7.00-8.00% | 6.50-6.75% |
| Property Types | SFR, 2-4 unit, condo, townhome, 5+ unit (commercial DSCR) | |
| Loan Amount | $100,000 to $5,000,000+ | |
| Max Properties | No limit (vs. 10 for Fannie/Freddie conventional) | |
| Vesting | Personal name or LLC (asset protection!) | |
| Income Docs | NONE — no W-2, no tax returns, no employment verification | |
DSCR vs. Conventional Investment Property Loans
| Feature | DSCR Loan | Conventional (Fannie/Freddie) |
|---|---|---|
| Income Documentation | NONE required | Full docs (W-2, taxes, paystubs) |
| Max Properties Financed | Unlimited | 10 maximum |
| LLC Vesting | Yes | No (personal name only) |
| Interest Rate | 6.50-8.00% | 6.10-6.75% |
| Down Payment | 20-25% | 15-25% |
| Closing Speed | 14-21 days | 30-45 days |
| Self-Employed Friendly | Perfect | Difficult |
🏘️ Ready to Scale Your Portfolio?
Compare DSCR lenders and get pre-qualified in minutes. No income docs needed.
Who Should Use a DSCR Loan?
✓ Perfect For
- • Self-employed investors with complex tax returns
- • Investors with 10+ financed properties (Fannie/Freddie max)
- • LLC-held investment properties (asset protection)
- • Foreign nationals investing in US real estate
- • Investors who write off depreciation (reducing taxable income)
- • House hackers buying 2-4 unit properties
- • BRRRR strategy investors (Buy, Rehab, Rent, Refinance, Repeat)
✗ Not Ideal For
- • Primary residence (DSCR is for investment properties only)
- • W-2 employees with fewer than 10 properties (conventional is cheaper)
- • Properties that don't cash flow (DSCR < 0.75)
- • Borrowers with 620-680 credit (most DSCR lenders require 680+)
- • Vacation rentals in some cases (lenders may not count Airbnb income)
DSCR Loan Rates by Credit Score & LTV
| Credit Score | 75% LTV | 80% LTV | 85% LTV (if available) |
|---|---|---|---|
| 760+ | 6.50% | 6.75% | 7.25% |
| 740-759 | 6.75% | 7.00% | 7.50% |
| 720-739 | 7.00% | 7.25% | 7.75% |
| 700-719 | 7.25% | 7.50% | 8.00% |
| 680-699 | 7.50% | 7.75% | 8.25% |
Rates as of Feb 2026 for DSCR ≥ 1.0, 30-year fixed. Rates 0.25-0.50% higher for DSCR < 1.0. Interest-only option adds ~0.125%.
BRRRR Strategy with DSCR Loans
The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) is the most powerful wealth-building strategy for DSCR loan investors. Here's how it works step-by-step:
DSCR Math on This Deal: Rent $1,800/mo ÷ PITIA $1,350/mo = 1.33 DSCR (excellent). Monthly cash flow after all expenses: $450/month. Annual ROI on $15K remaining invested: 360%. This is why experienced investors love DSCR + BRRRR.
Scaling Your Portfolio: 1 to 20+ Properties
| Properties | Loan Type | Monthly Cash Flow | Annual Income | Portfolio Value | Equity |
|---|---|---|---|---|---|
| 1-4 | Conventional or DSCR | $400-$1,600 | $4,800-$19,200 | $200K-$800K | $50K-$200K |
| 5-10 | DSCR (conv maxes at 10) | $2,000-$4,000 | $24K-$48K | $1M-$2M | $250K-$500K |
| 11-20 | DSCR only | $4,400-$8,000 | $52K-$96K | $2.2M-$4M | $550K-$1M |
| 20+ | DSCR + blanket loans | $8,000+ | $96K+ | $4M+ | $1M+ |
Why DSCR is essential for scaling: Conventional mortgages cap at 10 financed properties per borrower (Fannie Mae limit). DSCR loans have no property limit because each loan qualifies on its own rental income. Investors with 50+ DSCR loans exist. The only limit is your down payment capital and deal flow.
DSCR Loan Tax Advantages for Investors
💰 Mortgage Interest Deduction
100% of DSCR loan interest is tax-deductible against rental income. On a $165K loan at 7.00%, that's $11,500/year in deductions — often enough to make rental income tax-free on paper.
🏠 Depreciation
Depreciate the building value over 27.5 years. On a $200K property ($160K building value): $5,818/year in paper losses. Combined with interest deduction, most investors pay $0 tax on cash flow.
🔄 1031 Exchange
Sell a DSCR-financed property and defer ALL capital gains by exchanging into a like-kind property within 180 days. Many investors never pay capital gains by perpetually 1031-exchanging into larger properties.
📋 Cost Segregation
Accelerate depreciation with a cost seg study. Instead of 27.5 years, depreciate certain components in 5-15 years. On a $200K property, this can create $30K-$50K in Year 1 deductions — offsetting W-2 income for qualifying RE professionals.
Real Deal Analysis: Duplex with DSCR Loan
Property Details
Income & Cash Flow
Cash-on-cash return: 9.5% ($6,636 ÷ $70,000 down). Plus equity buildup of $3,800/yr + appreciation. Total return: 15-20%/year. Repeat 5-10 times = replace your W-2 income.
Top 5 DSCR Lenders Compared
| Lender | Min DSCR | Min Credit | Min Down | Max Loan | Rate Range | Best For |
|---|---|---|---|---|---|---|
| Kiavi | 0.75 | 680 | 20% | $3M | 6.50-8.00% | Speed + tech |
| Lima One Capital | 1.0 | 680 | 20% | $5M | 6.75-8.25% | Portfolio growth |
| Visio Lending | 0.75 | 680 | 20% | $2.5M | 6.75-8.50% | Low DSCR deals |
| New American Funding | 1.0 | 660 | 25% | $2M | 7.00-8.75% | Lower credit |
| Angel Oak | No min | 680 | 25% | $3M | 7.00-9.00% | No DSCR min |
DSCR vs. Conventional for Investment Properties
| Factor | DSCR Loan | Conventional | Winner |
|---|---|---|---|
| Income verification | None (property income only) | Full W-2/tax returns | DSCR |
| Property limit | Unlimited | 10 max | DSCR |
| Interest rate | 6.50-8.50% | 6.10-7.10% | Conv |
| Down payment | 20-25% | 15-25% | Conv |
| DTI requirement | None | Max 45% | DSCR |
| Closing speed | 21-30 days | 30-45 days | DSCR |
| LLC vesting | Yes (close in LLC) | Personal name only | DSCR |
Bottom line: Use conventional for your first 4-5 investment properties (better rates). Switch to DSCR once you hit DTI limits or need to scale beyond 10 properties. Many investors use both simultaneously.
Related Investor Resources
Editorial Note: DSCR loan rates and requirements vary by lender. Data from lender surveys Feb 2026. This is not investment advice. Editorial standards.