The debt service coverage ratio, also known as “debt coverage ratio”, is the ratio of operating income available to debt servicing for interest, principal and lease payments. It is a popular benchmark used in the measurement of an entity’s ability to produce enough cash to cover its debt payments.
Debt Service Coverage Ratio Loans
DSCR Loan FAQs
What is a DSCR loan?
A DSCR (Debt Service Coverage Ratio) loan qualifies real estate investors based on a property rental income rather than personal income.
How is DSCR calculated?
DSCR is the property gross rental income divided by its debt obligations. A ratio of 1.0 or higher means the income covers the debt.
Do DSCR loans require tax returns or W-2s?
Typically no. DSCR loans focus on the property cash flow, so personal income documentation is usually not required.
Who are DSCR loans best for?
Real estate investors, including self-employed borrowers, who want to qualify based on rental income.