A DSCR loan qualifies you on the property, not on you.
The math is simple. Take the property’s monthly rent. Divide it by the monthly mortgage payment, including taxes, insurance, and HOA. If that ratio is 1.0 or higher, the rental income covers the debt. Most lenders want to see that ratio at 1.0 or better before they’ll fund. A few — we’re one of them — will go down to 0.75, which means the property covers 75% of the payment and the borrower’s reserves carry the rest.
That’s the whole product in two paragraphs. The rest of this guide is about the parts that actually matter when you’re underwriting a real deal: where the rate gets set, what blows up an approval, and where most investors leave money on the table.
If you’d rather just run your scenario, use our DSCR calculator — actual rates and LTVs, not “starting at” pricing.
Who actually uses DSCR loans
Not who they were designed for. Who they’re working for right now.
- Self-employed investors whose tax returns don’t reflect their cash flow. Significant write-offs, depreciation, and pass-through structures can show a Schedule C income figure that has little to do with the cash actually available to service debt. Conventional underwriting reads the return. DSCR reads the property.
- Foreign nationals buying US rentals. No US tax history, no US W-2, no US credit in some cases. DSCR is one of a small number of programs that work for this borrower at all.
- Investors scaling past the conventional cap. Fannie Mae caps conventional financing at 10 financed properties. DSCR programs generally don’t carry that cap — though individual lenders may impose their own portfolio overlays. We’ve closed loans for investors with 40+ properties; at that point, conventional isn’t an option.
- Investors who want to close in an LLC. Conventional won’t allow it. DSCR will, with the borrower personally guaranteeing the loan. That matters for liability separation, estate planning, and partnership structures.
- Short-term rental operators. Airbnb, VRBO, mid-term furnished rentals. DSCR programs underwrite STR income using AirDNA data or appraisal-based projections. Conventional underwriting can’t.
The common thread isn’t “people who can’t qualify for conventional.” It’s “people for whom conventional asks the wrong questions.” DSCR asks a better question: does the property pay for itself?
What the ratio actually means in practice
DSCR = Net Operating Income ÷ Total Debt Service
In plain math: monthly rent divided by PITIA (Principal + Interest + Taxes + Insurance + HOA).
Three real examples from deals we see weekly:
Strong deal — DSCR 1.40 SFR in Charlotte, NC. Rents for $2,800/month. PITIA: $2,000. Ratio: 1.40. This deal qualifies almost everywhere, gets the best rate tier, and the underwriter doesn’t sweat anything.
Standard deal — DSCR 1.05 SFR in Tampa, FL. Rents for $2,500/month. PITIA: $2,380 (Florida insurance is the problem). Ratio: 1.05. Qualifies. Gets standard pricing. Most lenders fund.
Sub-1.0 deal — DSCR 0.85 SFR in Austin, TX. Rents for $2,400/month. PITIA: $2,825 (Texas property taxes did this). Ratio: 0.85. This deal gets declined at most DSCR lenders. We’ll fund it with a rate premium, additional reserves, and capped at $1.5M loan amount. The investor still does the deal because Austin appreciation has historically outpaced the carry difference.
The third example is where the market separates. Anyone can fund a 1.40. Funding a 0.85 takes a lender with an actual program for it.
A real deal: how an STR almost died — and didn’t
This one captures three of the most common ways DSCR deals go sideways: positioning, leverage caps, and a hard money clock running in the background.
The borrower owned a single-family rental in Texas, financed with a hard money bridge. The plan was a DSCR refi out of the bridge into 30-year fixed. They needed 80% LTV — not a preference, a must. Below that, the deal didn’t work.
They started with another lender who told them 80% was fine. The appraisal came back showing the property was rented in 3-month increments to traveling professionals. It was a short-term rental, not a long-term rental — obvious from day one.
The original lender’s STR program capped at 75% LTV. At best they misled the borrower; at worst it was a bait and switch. Either way the deal collapsed — three weeks lost.
Meanwhile, the hard money clock had run out. The bridge had moved into its penalty phase — exorbitant default rate, monthly penalty payments, the whole structure that exists specifically to push borrowers off bridge financing fast. Three weeks wasted, and now the carrying cost was climbing every day.
The borrower found us. We underwrote the property correctly the first time — as the STR it actually was — and went to 80% LTV, which most won’t. We called the hard money lender directly, explained the timeline, and got the borrower some near-term relief while we closed. The loan funded in 16 days.
The lesson isn’t that we’re heroes. The lesson is what to watch for:
- An STR is an STR is an STR. A property rented in 3-month furnished increments to corporate tenants is a short-term rental. Lenders who don’t catch that upfront — or pretend not to — find out at the appraisal. The original lender on this deal knew. They told the borrower what they wanted to hear, then repositioned once the borrower was committed.
- Almost every lender caps STR at 75% LTV. We don’t. Defy’s STR program goes to 80%. That single point is the difference between this deal closing and this deal dying.
- Hard money has a clock, and it doesn’t pause when your refi lender pivots. If you’re refi’ing out of bridge financing, the cost of three lost weeks compounds in two directions: penalty rate at the bridge, plus the rate lock you didn’t capture.
We see a version of this deal every month. Different state, different property type, different surprise. The pattern is the same.
Where the rate gets set — the five drivers
Don’t trust headline rates. Every DSCR rate sheet has dozens of cells, and where you land depends on five things:
- FICO score. Single largest driver. The spread between a 740 borrower and a 660 borrower can be 200+ basis points on the same deal.
- LTV. Higher leverage, higher rate. The breakpoint between 75% and 80% LTV is wider than most investors expect. 85% LTV is another step up.
- DSCR ratio. 1.0+ gets the headline rate. Sub-1.0 carries a premium. The premium is real but not catastrophic — usually 50–100 basis points.
- Property type and use. Single-family long-term is the cheapest. 2–4 units, condos, condotels, non-warrantable condos, and short-term rentals all carry premiums.
- Loan purpose. Purchase < rate-and-term refi < cash-out refi. Cash-out refis are capped at 70–75% LTV at most lenders. We'll go to 80% on the right deal.
Today (May 2026), our headline rate for a 740 FICO at 75% LTV on a 1.0+ DSCR purchase is in the low 6s. Every deal moves up from there. See our current DSCR rates page for the full matrix.
What blows up an approval
After 25 years underwriting Non-QM, here’s the short list of things that kill DSCR deals — and most of them are avoidable:
- Property doesn’t qualify as investment. Owner-occupied properties, second homes, fix-and-flips, and vacant land are out. DSCR is investment-property-only.
- Below-market rent on the existing lease. If you have a tenant paying $1,800 and market rent is $2,400, the lender underwrites to market — but only if you provide a rental market analysis or appraisal-supported rent comp. Without that, they default to the lease amount and your DSCR craters.
- Property mispositioned as LTR when it’s actually STR. As the story above illustrates. Get the use case right at application, not at appraisal.
- Property tax sticker shock. Texas, Illinois, New Jersey, parts of Florida — high property taxes compress DSCR fast. Investors model the deal at last year’s tax bill and miss the reassessment hit. Pull the current millage rate, not last year’s number.
- Insurance binder coming in higher than estimated. Florida is the obvious one. Coastal Carolinas and parts of California now too. Get a real quote before you lock the rate.
- Reserves too thin. Most DSCR programs require 3 months of PITIA in liquid reserves after closing. Sub-1.0 programs require 6+. If you’re closing with the absolute minimum cash to close, you don’t have reserves and the loan doesn’t fund.
- LLC formation issues. If you’re closing in an entity, that entity needs to be properly formed in the state of the property, with the right operating agreement and the right authorized signer. Last-minute LLC formation delays close more deals than you’d think.
How DSCR compares to the alternatives
For the same investor on the same deal, you’ve usually got three options:
| DSCR | Conventional investment | Hard money / bridge | |
|---|---|---|---|
| Qualifies on | Property income | Personal income + DTI | Asset value, no income |
| Documentation | Lease or rent comp | Full tax returns, W-2s | Minimal |
| Max LTV | Up to 85% | 75–80% typical | 65–70% typical |
| Rate range | Mid-6s to low-9s | Mid-6s to mid-7s | 9–12%+ |
| Term | 30-year fixed available | 30-year fixed | 6–24 months typical |
| Speed | 14–21 days | 30–45 days | 7–14 days |
| LLC closing | Yes | No | Yes |
| Limit on financed properties | None (program level) | Fannie cap at 10 | None |
For an investor with strong W-2 income, low leverage, and ≤10 properties, conventional often wins on rate. For everyone else — which is most active investors past the second or third property — DSCR is structurally the right product. Hard money is for short timelines, not long-term holds.
The Defy DSCR program — the specifics
We’ve referenced our parameters throughout this guide. Here’s the consolidated view:
- Minimum DSCR: 0.75 (sub-1.0 carries rate premium and higher reserves)
- Maximum LTV: 85% on SFR purchases for 740+ FICO at 1.0+ DSCR. 80% standard. 80% on STR. 70–75% on cash-out refi (80% on the right deal).
- Minimum FICO: 640
- Loan amounts: No hard cap above 1.0 DSCR, subject to overall scenario. $1.5M cap for sub-1.0 deals.
- Property types: SFR, 2–9 unit multifamily, condos (warrantable and non-warrantable), condotels, town homes, PUDs, modular, co-ops. Dedicated Airbnb/STR program.
- Reserves: 3 months PITIA standard. 6+ for sub-1.0.
- Closing speed: 14–21 business days typical. Foreign national 21–28.
- Closing entity: LLC allowed and common.
- Rate locks: 30, 45, 60 day standard. 75–90 day available with extension fee.
If you want a real quote on a real deal, our team gives indications within 5 minutes. Not “starting at” pricing — your actual rate on your actual scenario.
Common questions, answered honestly
Can I get a DSCR loan with a 1.0 DSCR if the property has no rental history? Yes, if you can support market rent with an appraiser’s rent schedule or comparable lease data. For STRs, AirDNA reports work.
Will a DSCR loan hurt my credit? The credit pull is a single hard inquiry. No different from any other mortgage.
How long do prepayment penalties last? Most DSCR programs carry 3–5 year prepayment penalties, declining each year. Some programs offer a buy-down option to shorten or eliminate the prepay — adds to the rate.
Can I refinance from a DSCR loan into a conventional later? Yes, if your personal income at the time of refi qualifies under conventional DTI. This is a common play — buy with DSCR, season the property, refi to conventional once cash flow stabilizes.
Are DSCR rates going to come down? We’re not in the business of forecasting rates. They move with the broader investment property market, which moves with the 30-year fixed, which moves with the 10-year Treasury. Watch the 10-year.
Where to go next
- Run your scenario: DSCR Loan Calculator
- See current rates: DSCR Loan Rates
- Detailed requirements: DSCR Loan Requirements
- State-specific guides: Texas · Florida · California
- Cash-out refi specifics: DSCR Cash-Out Refinance Guide
If you’re underwriting a deal this week, the fastest path is to talk to a Defy lending team member. Five minutes on a call gets you a real rate indication, a real LTV, and a real assessment of whether the deal pencils — not a marketing brochure.
About the author: Todd Orlando is Co-Founder and CEO of Defy Mortgage. Twenty-five years in Non-QM and investment property lending. Defy is a direct Non-QM lender specializing in DSCR, bank statement, P&L, and asset depletion programs for self-employed investors, foreign nationals, and real estate operators scaling beyond conventional limits.
