DSCR Loan for Airbnb and Short-Term Rental: A Guide for Investors

If you’re an investor trying to expand into short-term rentals, you’ve probably hit a few walls with conventional loans before. Strict income requirements can disqualify you from ideal loan amounts and terms if you take advantage of write-offs, and caps on how many properties you can finance can all slow down your growth. But if you have the liquidity and experience, all you have to do is pivot to a different financing product. A DSCR loan for Airbnb and other STRs is one of the best pathways for those with unconventional incomes to tap into this lucrative market. 

At Defy Mortgage, DSCR loans are our specialty. Whether you’re an entrepreneur, self-employed professional, business owner, or full-time investor, our 75+ loan products can be tailored from the ground up to be an exact match for your unique needs. With both traditional and non-traditional loan offerings, we’re deeply familiar with the advantages DSCR loans have over conventional loans, and vice versa.

Here’s what you’ll get from this comparison:

• A clear table comparing traditional vs. DSCR loans: loan type, qualification basis, documentation, eligible properties, and ideal use cases.
• Insights into which loan type works best for Airbnb or short-term rental investments.
• Key trade-offs: interest rates, limits on properties, and documentation requirements.
• Actionable guidance for investors who want to maximize rental income while minimizing red tape.

TL;DR 

• DSCR loans give you the option to qualify based on property income, not just personal income. Prove income with rent roll and lease agreements as well as tax returns, W-2s, and pay stubs. DSCR loans have no property limit.
• Conventional loans rely on your income and cap financed properties at ~10. 
• DSCR = NOI ÷ Annual Debt Payments. A score of 1.0+ means the property covers its mortgage; 1.25 is considered strong by most investment property lenders.
• Short-term rentals qualify using projected STR income, often via AirDNA, appraiser STR schedules, or 12-month trailing data.
• STR rules can vary by state and city. Always check local STR regulations before buying.
• DSCR loan perks include easier qualification, no cap on number of properties, faster closings, and less documentation.
• Main drawbacks to DSCR-funded STRs include slightly higher interest rates, fewer lenders offer STR-friendly DSCR programs, and vacancy risk still matters.
• How to get a DSCR loan in 5 steps:
  • Meet lender minimums (credit, reserves, LTV, DSCR threshold).
  • Confirm strong STR income projections.
  • Prepare core documents (ID, entity docs, reserves, contract, rent schedule).
  • Compare DSCR lenders for rates and flexibility.
  • Apply, complete appraisal + underwriting, then close.
• Defy Mortgage offers STR-focused DSCR loans with flexible underwriting, interest-only options, and DSCR minimums as low as 0.55.
• Alternatives to DSCR loans include: bank-statement loans, P&L loans, asset-depletion loans, and fix-and-flip financing.

How Does a DSCR Loan for Airbnb Work?

A DSCR loan for Airbnb and other STR properties is a flexible, cashflow-focused financing solution that prioritizes the property’s income over your own. Investing in Airbnb and short-term rentals has become a popular way to maximize returns in real estate, especially with property management companies handling much of the day-to-day work. 

Despite reports of market cooling, short-term rentals appear to be on-track to reach is projected valuation of $8.9 billion by 2026, especially given the fact that 100% bonus depreciation is back. 

With 100% bonus depreciation, certain improvements and equipment are now fully tax-deductible, giving investors more capital to meet growing demand in the recovering tourism sector and expanding business travel sector. 

What are STRs?

Short-term rentals (STRs) are properties rented for brief periods, ranging from a single night to several weeks or months, through platforms like Airbnb, VRBO, and HomeAway. These are typically rented out to tourists or business travelers, but can occasionally serve as emergency living arrangements in areas with high rental demand, such as California.

STRs offer flexibility for renters in that they only pay for the days and nights you have to occupy the rental. For investors, they’re the primary way to take advantage of seasonal demand.

Financing these investments, however, can be tricky with traditional loans. This is where DSCR loans come in. 

What’s a DSCR loan?

A debt-service coverage ratio (DSCR) loan allows you to qualify for a mortgage based on the rental property’s income rather than your personal income. Lenders use the DSCR metric to determine whether the property can “pay for itself,” including its mortgage payments, taxes, insurance, and operating expenses.

This makes these loans ideal for investors with non-traditional income. Additionally, as a type of non-QM (non-qualified) loan, DSCR loans offer more flexible criteria compared to conventional mortgages.

How to Calculate a Rental Property’s DSCR

Calculating a rental property’s DSCR isn’t hard. This is the formula:

The number on the top represents the net operating income for the year, which is the property’s income minus any operating expenses. Whereas, the number on the bottom represents the total debt payments for the year, including principal and interest. Keep in mind that some lenders include property taxes and insurance in the annual debt service calculation.

A DSCR value of 1.0 or over means that the property generates enough income to cover its debt payments. In contrast, a DSCR of below 1.0 means the property does not generate enough income to cover its debt payments. Generally, a DSCR of 1.25 is considered “strong” by most lenders.

Why Get DSCR Loans for Airbnb and Short-Term Rentals?

DSCR loans for Airbnb and short-term rentals offer a powerful way to expand your investment property portfolio. Let’s dive into the various pros and cons of this investment strategy:

Pros of DSCR Loans for Airbnb and Short-Term Rentals

• Qualify with rental income: Approval is based on the property’s cash flow, not your personal finances.
• Qualify even with a high DTI: If you borrow under an LLC, your personal debt won’t count towards the DTI calculation during underwriting. Only the property’s debt gets counted.
• No tax returns, W2s, or pay stubs required: Simplifies the application process for investors with non-traditional income.
• No hard limit on the number of DSCR loans: Finance multiple properties simultaneously without restrictions.
• Faster approval process: Lenders focus on property performance, so closings can be quicker than conventional loans.
• Secure STR market growth: With the short-term rental industry projected to surge very soon, DSCR loans let you get your foot in the door ahead of the competition, maximizing your gain.

Cons of DSCR Loans for Airbnb and Short-Term Rentals

• Potentially higher interest rates: DSCR loans may have slightly higher rates due to the investment property risk.
• Limited availability: Not all lenders offer DSCR loans for short-term rentals.
• Risk during vacancies or slow seasons: Extended periods without bookings may make it challenging to cover debt payments.

How to Qualify and Get a DSCR Loan For Short Property Rentals in 5 Simple Steps?

If debt service coverage ratio loans sound like the best path forward for you, Defy Mortgage is ready to assist you on your application journey. Here are five simple steps covering the qualification and application process from start to finish:

Step 1: Check Your DSCR Loan Eligibility

Start by confirming you meet the baseline lender requirements. Since DSCR loans are non-QM, every lender sets their own criteria. Still, most will evaluate your credit score, cash reserves, acceptable LTV, and whether the rental property can generate enough income to meet or exceed their minimum DSCR threshold. 

For example, Defy Mortgage has the following requirements for DSCR loans:

• Minimum credit score: 640
• Minimum down payment: 15% (pending DSCR, property type, loan type, and FICO) Purchase SFR only
• Minimum DSCR: 0.55
• Minimum cash reserve: 3 months
• Maximum loan amount: $6M+
• Qualify using alternative income verification
• Foreign nationals allowed
• Interest-only option available

Please note that not all loan programs or DSCR requirements above allow STR properties, so it’s essential to review the specific program guidelines and requirements. If you have any further questions or would like more information, just reach out.

Step 2: Analyze the Property’s Rental Income and DSCR

Next, evaluate whether the property can pass the DSCR test using verified short-term rental income projections. Focus on properties with strong occupancy trends, seasonal stability, and competitive daily rates to maximize approval odds.

Lenders typically calculate the DSCR of short-term rentals using AirDNA, appraiser-provided STR schedules, or 12-month trailing rental data if available. A DSCR of 1.000 and above is ideal, but some lenders allow lower ratios. At Defy Mortgage, we go as low as 0.55, with no-ratio options unlocking for borrowers with 740+ FICO and >= 1.000 DSCR (Max loan amount $1M). 

Step 3: Prepare Your Documentation

Even though DSCR loans don’t require tax returns, W-2s, or traditional income verification, non-traditional lenders still need essential documents. Prepare the following:

• A valid ID and entity docs (if borrowing through an LLC)
• Proof of liquid reserves (bank statements) sufficient to cover down payment and closing costs. At Defy Mortgage, we also require at least 3 months’ worth of mortgage payments in reserve.
• Property purchase contract
• STR income estimates or appraiser rent schedule

Step 4: Choose The Best DSCR Lender For You

Not all DSCR lenders are the same. Terms such as DSCR minimums, reserve requirements, and underwriting flexibility can vary widely. You should research each potential option in order to identify the best fit. 

Make sure to check if they offer flexible structures such as interest-only options, support for foreign nationals, and specialized underwriting for short-term rentals. Defy Mortgage’s guide to the best DSCR lenders can help you along.

Step 5: Application and Closing

After selecting a lender, submit your application and proceed to appraisal, where the lender confirms the property’s value and STR income potential. For short-term rentals, this often includes a 1007 rent schedule or STR income model included with the appraisal.

Once underwriting reviews reserves, DSCR, credit, and appraisal, your loan is cleared to close. DSCR loans typically close faster than traditional mortgages due to fewer documentation requirements, making them ideal for investors operating in competitive STR markets.

Traditional Loans vs. DSCR Loans for Airbnb and Short-Term Rentals

When you’re financing an Airbnb or short-term rental, your chosen loan will shape everything from qualification standards to how fast you can scale. Let’s take a look at the various differences between traditional loans and DSCR loans:

	Traditional (Conventional) Loans	DSCR Loans
Loan Type	Qualified Mortgages (QM) that must follow CFPB rules and conforming guidelines.	Non-QM loans with flexible underwriting; not bound to conventional standards.
Qualification Basis	Borrower’s personal income, employment history, tax returns, W-2s, pay stubs, and full financial documentation.	Property’s projected rental performance. Qualification depends on DSCR, not personal income.
Documentation	Tax returns, W-2s, Pay stubs, Appraisal report, May also check assets and liabilities	Lease agreement Market rent reports Short-term rental income projections Entity documentation if buying under an LLC Appraisal report
Max Properties	Fannie Mae/Freddie Mac generally limit borrowers to 10 financed properties, including their primary home and second home.	No maximum limit.
Eligible properties	Single-family homes2-4 unit multifamily propertiesCondos (warrantable only)TownhomesPUDsSite-built homesManufactured homes (if meets HUD code)New constructionMixed-use (if primarily residential)Primary residences	Single-family homes, 2-4 unit multifamily properties, Condos (warrantable and non-warrantable), Townhomes, Row homes, PUDs, Site-built homes, Modular homes, Co-ops, Condotels
LLC Eligibility	Cannot purchase the property under an LLC. Must close in personal name.	Can purchase under an LLC, offering liability and potential tax benefits.
Ease of Qualification	Can be difficult for investors due to write-offs, variable income, or existing property debts.	Easier for investors because underwriting looks at the asset’s ability to pay for itself.
Best For	Borrowers with strong, stable documented personal income and fewer existing properties.	Investors focused on rental properties, particularly Airbnb and short-term rentals where property-generated cash flow is strong.
Interest Rates	Typically lower for borrowers with high FICO scores and low DTIs.	Often slightly higher as a non-QM loan, but can be decreased depending on LTV, loan amount, and DSCR.
Ideal Use Cases	Investors seeking low down payments	Rapid portfolio growthInvestors with complex or variable income.

Rules and Regulations for Airbnb and Short-Term Rentals

Rules and regulations for Airbnb and short-term rentals vary from state to state and even from county to county. Below, we’ve listed a few government websites for areas that are popular for short-term rentals:

• California
• Florida
• Texas
• Santa Barbara, CA
• Orlando, FL
• Nashville, TN (check out Defy’s case study on STRs in Nashville, TN for “legacied-in” properties)

Before buying an investment property, it’s important to familiarize yourself with the local rules and regulations.

Defy Mortgage Short-Term Rental (STR) Specialized Financing Details for Real Estate Investors

• Existing Permits Made Easy: Investors can maintain permits by purchasing the LLC and property. No deed transfer hassles!
• Many Property Types: SFR, PUD, Townhome, or Warrantable Condo
• Flexible Financing: Up to 75% LTV purchase and up to 70% LTV refinance for STRs 
• Low FICO: Minimum FICO of 700 for most loan programs 
• DSCR Transparency: Minimum DSCR: > 1.000nimum DSCR: > 1.000
• Smooth Transition: No deed transfer, just a seamless LLC membership change.
• Portfolio Growth: Investors can finance up to 20 properties. Imagine the possibilities!
• STR Requirements: 
  • 6 months PITIA (Principal, Interest, Taxes, Insurance, and Association fees)
  • Non-Owner Occupied (Investment property)
  • 12 months of short-term rental income documentation
  • 60% minimum occupancy rate
  • AirDNA report to determine monthly rental income

What Licenses and Permits Are Required for Short-Term Property Managers?

Beyond general rules and regulations, there are several licenses and permits required to legally operate your business. Here are some to keep in mind:

• Business license or permit for a commercial venture
• Short-term rental license or permit
• Proof that your investment property is not your primary residence (if required)
• Real estate license (if required)

Similar to rules and regulations, these required licenses and permits vary depending on the area. To get a thorough understanding of what’s required, contact your local government office, contact your local attorney, contact your local realtor, or check your local government website.

DSCR Loan Alternatives for Real Estate Investors

DSCR loans aren’t the only option out there for real estate investors. Below, we’ve outlined several other loan options to consider that may be a better fit for you:

• Bank statement loans: Use bank statements and your monthly average deposit to qualify.
• Profit & loss (P&L) loans: If you own a business, use your business’s P&L statements to qualify.
• Asset depletion loans: For high-net-worth individuals with significant liquid assets. Qualify using your stocks, savings, money market, and retirement accounts.
• Jumbo loans: For those who want QM loans with amounts exceeding the local conforming loan limit.
• Fix-and-flip loans: Provide funds to purchase a worn-down home, renovate it, and quickly resell it at a profit.

Key Takeaways

A DSCR loan for Airbnb and short-term rentals is a unique, cashflow-focused financing solution that can be invaluable to investors with complex income pictures. Whether you’re an entrepreneur, self-employed professional, or full-time investor, DSCR loans remove traditional income barriers by letting the property’s projected cash flow do the heavy lifting during underwriting. With the STR industry projected to continue expanding, leveraging DSCR loans can provide the flexibility and financial access necessary to capitalize on this opportunity.

If you’re ready to act, remember to check your eligibility (FICO score, down payment, and reserves), select properties with ideal DSCRs, and prepare the required documentation before selecting a lender. Proper planning, accurate rental projections, and choosing the right property can help ensure approval and maximize cash flow potential.

Defy Mortgage is here to support you every step of the way. Our team can guide you through eligibility, documentation, and closing, helping you take advantage of DSCR loans to grow your STR portfolio quickly and efficiently. Schedule an appointment or call us at (615) 622-1032 to get started today.

If you’re a mortgage broker, Defy TPO can help you expand your product offerings to investors in the Airbnb and STR market with Defy Mortgage’s flexible non-QM solutions. Gain market dominance by providing underserved clients with financing that matches their unique income and goals. Send us your pricing scenarios, and we’ll show you how it all works.

Frequently Asked Questions

What Licenses and Permits Are Required for Short-Term Property Managers?

Common licenses and permits required for managing short-term rentals like Airbnb and VRBO include:

• A general business license or permit: To prove that you are permitted to operate a commercial venture.
• A short-term rental license or permit (or STR permit): The exact permit can vary depending on whether you are also using the STR property as a primary residence (Note that properties that you intend to use as a primary residence are ineligible for DSCR loans). 
• Proof of residency: To prove that the property is not being used as your primary residence. Not all local jurisdictions require this. 

Since requirements vary widely depending on city, county, and even neighborhood regulations, remember to check with local government offices, a local attorney, or a licensed realtor in the area where the property is located.

How does a DSCR loan compare to other types of financing for Airbnb properties?

DSCR loans differ significantly from other types of investment property financing in the following ways:

• Qualify based on property income: DSCR loans base qualification on a property’s income potential rather than your personal income. This makes DSCR loans more accessible to investors with non-traditional or unstable personal income, such as self-employed individuals and investors who take advantage of tax write-offs.
• No hard property cap: There’s no limit on the number of properties you can finance using DSCR loans. If you borrow under an LLC, each DSCR loan won’t count toward your personal debt-to-income (DTI) ratio, meaning you can continue expanding your portfolio without affecting your ability to qualify for additional loans.
• Flexible underwriting: DSCR loans are considered “non-QM” (non-qualified mortgages), offering lenders more underwriting flexibility than conventional loans. This flexibility allows more creative scenarios (e.g., purchase via an LLC, multiple properties, STR properties).

What is the minimum DSCR required to qualify for a loan on Airbnb properties?

Some lenders go as low as 0.75 DSCR, but most expect at least 1.00 to 1.25 DSCR to approve a loan for an Airbnb/short-term rental property. A DSCR of 1.0 means the rental income equals the debt service, but 1.25 means it makes 25% more than it needs to break even, giving a buffer for operating costs, vacancy periods, maintenance, etc.

At Defy Mortgage, however, we allow DSCR loans down to 0.55 and no-ratio options for borrowers with 740+ FICO and loan amounts up to $1M. 

What are the typical interest rates for DSCR loans on Airbnb properties?

Typical interest rates for DSCR loans on Airbnb / short-term rental properties tend to be 0.5%-2% higher than conventional loans because DSCR loans are non-QM and involve more perceived risk due to rental income variability. 

Freddie Mac reports an average conventional mortgage rate of 6.23% as of November 26, 2025, so you can expect DSCR rates to range between 6.7% and 8.2% on average. At Defy Mortgage, our lowest possible rate for DSCR loans as of November 26 2025 is 5.875% (Rate assumes a 30-year fixed mortgage for a $1,000,000 property purchase in Texas with 55% LTV, 800 FICO, and >1.0 DSCR)

How do I get a short-term rental DSCR loan with Defy Mortgage?

If you want to get a DSCR loan for a short-term rental via Defy Mortgage, the process is very straightforward: 

• Check eligibility: Make sure you have at least 640 FICO and enough funds for 15-30% of the purchase price, closing costs, and 3 months of mortgage payments. 
• Choose a property: Ideally with DSCR > 1.000.
• Get your documentation ready: Remember to include a valid ID, entity documentation if purchasing under an LLC, proof of liquid reserves (bank statements), the property purchase contract, and short-term rental income projections or an appraiser’s rent schedule
• Document 12 months of short-term rental income: This is important, and the property income for qualifying will be 80% of the annual revenue divided by 12. Additionally, you must be able to document STR rental operator experience in the last 12 months. AirDNA will be used to determine the monthly rental income, and a minimum 60% occupancy rate is required. It’s also important to note that not all loan programs allow STR properties, so it’s essential to review the specific program guidelines and requirements. If you have any further questions or would like more information, feel free to ask.

Once you’ve got these down, schedule an appointment with Defy Mortgage or call us at (615) 622-1032 to start the application. We’ve always got someone by the phone 24/7.