Will the rental cash flow enough to qualify?

DSCR ratio

1.00FAILS (need 1.00)

Gross rent ($3,500) ÷ PITIA ($3,502) = 1.00. You need either: rent ≥ $3,502, OR purchase price ≤ $499,706, OR larger down payment to lower PITIA.

What makes DSCR loans different

The pitch: qualify based on the property’s rent, not your personal income. No tax returns, no W-2 verification, no DTI test. Powerful for self-employed investors, those with many financed properties, or anyone whose personal docs don’t fit conventional underwriting.

The trade-offs:

• Rate premium 1-2% over conventional investor loans
• Down payment typically 20-25% (some lenders 15% with overlays); comparable to or slightly higher than conventional investor (15-25%)
• Origination points (1-3%) common
• Tighter credit requirements (typically 660+ FICO; 700+ for best pricing)
• Reserves required (3-6 months PITIA in liquid assets)
• Prepayment penalty often included (1-3 yr term, 1-5% step-down or "5/4/3/2/1")
• Interest-only options offered by many DSCR lenders (10yr IO + 20yr amort) — lower P&I helps DSCR pass

How DSCR is calculated: Gross monthly rent ÷ PITIA, where: P=Principal, I=Interest, T=Taxes, I=Insurance, A=Association (HOA). Some lenders use PITI (no HOA). Some use net rent (after vacancy/maintenance) but most use GROSS.

The appraiser’s Form 1007: rent comparable schedule. Appraiser pulls 3-4 comparable rentals to verify your projected rent is realistic. Shoot for comps within 1 mile, similar sq ft, similar features.

STR / Airbnb income: a growing minority of DSCR lenders accept STR income, but the methodology varies wildly. Common approaches: (1) 12-month operating history from your bank statements / Airbnb portal, (2) AirDNA market projections haircut 20-30%, (3) lower of LTR comp (Form 1007) or STR projection. Many lenders still require LTR comps only and will value the property as a long-term rental regardless of how you intend to operate it. Ask BEFORE you order the appraisal.

When DSCR beats conventional:

• You have 10+ financed properties (Fannie/Freddie cap)
• Self-employed with low qualifying income
• Recent ramp in income not yet on tax returns
• Prior bankruptcy/foreclosure outside conventional waiting periods
• Foreign national investor

DSCR is non-QM (non-Qualified Mortgage), so terms vary widely by lender. Always shop 3+ DSCR lenders — rate, points, prepayment penalties, and reserves vary dramatically. See Investment Property Analyzer for the full deal underwriting beyond just qualification.