What is DSCR Loan?
A DSCR loan is a non-QM investment-property mortgage underwritten primarily on the subject property's cash flow (Debt Service Coverage Ratio) rather than the borrower's personal income. The workhorse loan for BRRRR refis and small-multifamily acquisitions.
DSCR loans skip the W-2 / tax-return scrutiny that conventional financing requires. The lender computes the property's NOI, divides by the proposed PITI, and approves if the ratio clears their threshold (typically 1.10-1.25). The borrower's personal DTI doesn't factor in.
Typical terms in 2026: 75-80% LTV, 7.5-9.5% interest, 30-year amortization, no prepayment penalty after year 3. Specialty lenders (Visio, Kiavi, Lima One, RCN Capital, plus dozens of smaller shops) dominate the market.
For investors building portfolios, DSCR loans eliminate the conventional 10-property loan limit and remove the W-2 verification headaches that grow with each acquisition. Standard loan product for serious BRRRR operators after their first 2-3 conventional acquisitions.
Concepts that connect.
Debt Service Coverage Ratio (DSCR) is the ratio of a property's annual net operating income to its annual debt service. A DSCR of 1.20 means the property generates 20% more income than it needs to cover the loan payment. Most DSCR lenders require 1.10-1.25 to underwrite.
Net Operating Income (NOI) is a rental property's annual gross rental income minus all operating expenses, before debt service and income taxes. NOI is the denominator of cap rate and the numerator of DSCR — it's the most-used number in rental underwriting.
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat — a real-estate investing strategy where an investor buys a distressed property cheap, renovates it, rents it out, refinances at the improved appraisal to recover most or all of the original capital, then repeats the process with the recovered capital.
Loan-to-value ratio (LTV) is the loan amount divided by the property's appraised value, expressed as a percentage. LTV drives lender pricing, down payment requirements, and PMI thresholds. Lower LTV = lower risk to lender = better rates and terms.
A cash-out refinance is a mortgage refinance for more than the existing loan balance, with the difference paid to the borrower in cash. Used by BRRRR investors to recover capital after stabilizing a rental property, by long-term holders to access appreciated equity.
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