What Is a DSCR Loan? Full Guide for Real Estate Investors

If you’re exploring real estate investing, you’ve likely heard the term DSCR loan. But what exactly does it mean, and how can it help you grow your rental property portfolio? A DSCR loan, short for Debt Service Coverage Ratio loan, is designed for real estate investors who want to qualify for financing based on a property’s income potential rather than personal income. These loans are gaining traction in markets like Arizona, Texas, Florida, and California, offering flexibility and faster approvals for borrowers focused on cash flow.

In this guide, we’ll break down what a DSCR loan is, how it works, who qualifies, and why it might be one of the best options for today’s real estate investors.

A DSCR loan, or Debt Service Coverage Ratio loan, is a type of investment property loan that allows borrowers to qualify based on the property’s cash flow rather than their personal income.

In simple terms, lenders look at whether the rental income from the property can cover the loan’s principal, interest, taxes, insurance, and association dues. This is known as the debt service.

For example, if your property brings in $5,000 per month in rent and your total loan payment is $4,000, your DSCR would be 1.25 ($5,000 ÷ $4,000).

Qualifying for a DSCR loan is easier than many investors expect. Lenders focus primarily on the cash flow of the property rather than your tax returns or W-2 income.

Here’s what most DSCR lenders near me will look for:

Minimum DSCR ratio of 1.0 to 1.25 depending on the lender
Good credit score (typically 660 or higher)
Sufficient property reserves
Appraisal showing strong rental income potential
Down payment of 20–25%

At Bonelli Financial Group, we make it simple to compare DSCR loans in Arizona, Texas, Florida, and California. Our team works with multiple DSCR lenders to find flexible terms and competitive rates for real estate investors.

Pros of DSCR Loans

Easier qualification since personal income is not required
Great for real estate investors expanding portfolios
Allows multiple investment properties under one program
No personal income documentation needed

Cons of DSCR Loans

Slightly higher interest rates than traditional mortgages
Requires a strong-performing property with positive cash flow
May need a larger down payment

Despite these factors, DSCR loans remain one of the most powerful tools for real estate investors seeking long-term growth and passive income.

The demand for DSCR loans has grown rapidly in states like Arizona, Texas, Florida, and California where the rental markets are thriving.

DSCR Loans Arizona: Ideal for investors in Phoenix, Scottsdale, and Tucson who want to finance short-term or long-term rental properties.
DSCR Loans Texas: A top choice for Dallas and Austin investors seeking flexible, fast approval financing.
DSCR Loans Florida: Perfect for Airbnb and vacation rental investors in markets like Tampa, Orlando, and Miami.
DSCR Loans California: Tailored for high-value markets like Los Angeles, San Diego, and Sacramento where rental demand remains strong.

If you’re searching for DSCR loans near me, Bonelli Financial Group can connect you with competitive programs across all these states.

What is a DSCR loan?
A DSCR loan, or Debt Service Coverage Ratio loan, is a type of real estate financing that qualifies borrowers based on the income their investment property generates rather than their personal income. Lenders use the property’s cash flow to determine loan eligibility.
How does a DSCR loan work?
A DSCR loan works by measuring the property’s ability to cover its mortgage payments. Lenders calculate the ratio between a property’s net operating income (NOI) and its total debt payments. A higher DSCR means stronger cash flow and less risk for the lender.
How do you calculate DSCR?
To calculate DSCR, divide the property’s annual net operating income by its annual debt service (principal and interest payments).
Example: If your property earns $60,000 and annual loan payments total $48,000, your DSCR is 1.25.
What is a good DSCR ratio?
Most lenders prefer a DSCR ratio of at least 1.20 or higher. A DSCR above this range shows the property’s income exceeds its loan obligations and is likely to qualify for better rates and terms.
Who qualifies for a DSCR loan?
Investors who own or are purchasing rental properties can qualify for DSCR loans. Lenders generally require good credit (around 660+), a minimum down payment of 20–25%, and proof that the property generates positive cash flow.
Are DSCR loans good for investors?
Most lenders require a minimum FICO score of 620, but requirements may vary.
What are the pros and cons of DSCR loans?
Pros: Easier qualification, faster approval, and no personal income verification.
Cons: Slightly higher rates and larger down payments compared to traditional loans.
How do I apply for a DSCR loan?
You can apply for a DSCR loan through a mortgage broker or lender that specializes in investment property financing. At Bonelli Financial Group, we help investors compare programs, calculate DSCR, and secure competitive loan terms.
What states offer DSCR loans?
Bonelli Financial Group offers DSCR loans in Arizona, Texas, Florida, California, and almost every other state helping investors finance single-family homes, multi-unit properties, and short-term rentals.
Who are the best lenders for DSCR loans?
The best DSCR lenders are those offering competitive rates, quick closings, and flexible qualification requirements. Bonelli Financial Group partners with top DSCR lenders nationwide to provide tailored loan solutions for investors.
Can you get a DSCR loan near me?
Yes. DSCR loans are available in most states. If you’re searching for DSCR lenders near me, Bonelli Financial Group can connect you with trusted local and national programs that fit your property goals.
What is the difference between DSCR and traditional mortgage loans?
Traditional mortgage loans qualify borrowers based on personal income, while DSCR loans focus on the property’s income potential. This makes DSCR loans ideal for investors looking to finance multiple rental properties.