DSCR loans explained
Written by Jay Beach, SVP, Investor Portfolio Lending · Updated
A DSCR (Debt Service Coverage Ratio) loan is an investment-property loan that qualifies on the property’s rental income instead of your personal income. There are no tax returns, no W-2s, and no debt-to-income calculation — the property’s rent versus its payment is what gets you approved. Mortava funds DSCR loans up to 85% LTV, 30- and 40-year fixed, with a minimum DSCR as low as 0.50.
What is a DSCR loan?
A DSCR loan is a business-purpose mortgage for rental real estate where the lender underwrites the asset, not the borrower’s tax returns. Because qualification is based on cash flow, DSCR loans are ideal for self-employed investors, full-time landlords, and anyone whose tax returns understate their true buying power.
These are not consumer mortgages — they are for investment properties held for business purposes, and they can close in an LLC or corporation for asset protection.
How is DSCR calculated?
DSCR = monthly rent ÷ monthly PITIA (principal, interest, taxes, insurance, and any HOA). A DSCR of 1.0 means the rent exactly covers the payment; above 1.0 means positive cash flow.
Example: a property rents for $2,400/month with a total payment of $2,000/month. DSCR = 2,400 ÷ 2,000 = 1.20. Mortava lends with a DSCR as low as 0.50, and interest-only options can push the ratio higher by lowering the payment.
A DSCR worked example: amortizing vs. interest-only
Illustrative only, not a quote or commitment to lend. Say a rental has market rent of $2,400/month and $500/month in taxes, insurance, and HOA. With a hypothetical $1,700/month principal-and-interest payment, PITIA is $2,200 and DSCR = 2,400 ÷ 2,200 = 1.09.
On an interest-only structure, a hypothetical $1,400/month interest payment brings PITIA to $1,900 and DSCR to 2,400 ÷ 1,900 = 1.26. Same rent, same property, stronger coverage. If rent were only $2,000 against the $2,200 PITIA, DSCR would be 0.91: below 1.0, but above Mortava’s 0.50 minimum. Real payments depend on your live-priced rate, so run your own numbers in the DSCR calculator or request a term sheet.
DSCR loan requirements
Most programs start at a 620 FICO, with better leverage and pricing at 660+ and 740+. Maximum leverage is up to 85% LTV on a purchase and up to 80% CLTV on a cash-out refinance. Expect to document property insurance and a lease (or market-rent appraisal). Typical reserves are around six months.
DSCR loan vs. conventional mortgage
A conventional loan caps how many financed properties you can hold and requires full income documentation. A DSCR loan has no such limit and no personal-income docs, so it’s the standard tool for scaling a portfolio past the conventional ceiling.
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