DSCR Loan Guide

A loan that qualifies based on the property's rental income — not your personal income.

Ian Alkire, Broker Owner · (737) 392-2812 · ialkire@infinityfamilygroup.com · San Antonio, TX

🏦 WHAT IS A DSCR LOAN?

Debt-Service Coverage Ratio

DSCR stands for Debt-Service Coverage Ratio. It's a type of investment property loan where the lender qualifies the loan based on the property's rental income — not your W-2s, tax returns, or personal income.

The ratio is simple: monthly rent ÷ monthly mortgage payment (PITIA). PITIA stands for Principal, Interest, Taxes, Insurance, and Association dues — the full monthly cost of owning the property.

Most lenders want a DSCR of 1.0 to 1.25 or higher. A ratio of 1.0 means the rent exactly covers the payment. A ratio of 1.25 means the rent covers the payment with 25% to spare — which gives lenders more confidence.

🧮 DSCR CALCULATION EXAMPLE

How the math works

Item	Amount
Monthly Rent (Market Rate)	$2,000
Monthly PITIA Payment	$1,600
DSCR (Rent ÷ PITIA)	1.25
Lender Minimum (typical)	1.0 – 1.25
Result	✅ Meets most lenders' requirements

⭐ A DSCR below 1.0 means the rent doesn't cover the payment — most lenders won't approve the loan at that ratio.

🎯 WHO DSCR LOANS ARE FOR

Three investor profiles

Military investors buying rentals near bases — Central Texas has strong rental demand near JBSA, Fort Cavazos, and Randolph AFB. A DSCR loan lets you qualify on the property's income — not your BAH or military pay.
First-time real estate investors — If you're buying your first rental and don't want to show personal income, DSCR is often the most straightforward path to financing.
Self-employed buyers whose tax returns understate income — Business owners and contractors who write off expenses aggressively often show low taxable income — making conventional qualifying difficult. DSCR sidesteps that entirely.

⚠️ RISKS AND CONSIDERATIONS

Know before you commit

DSCR loans are a powerful tool — but they're not the right fit for every investor. Know what you're getting into before you commit.

Higher rates and larger down payment — You'll pay more upfront and more each month compared to a conventional loan. The tradeoff is simpler qualifying — no income documentation required.
The property's cash flow must cover the payment — If the rental market softens and your rent drops below the PITIA payment, you're covering the gap out of pocket. Underwrite conservatively — don't assume peak rents.
Prepayment penalties can apply if you sell or refinance early — Many DSCR loans have a 3–5 year prepayment penalty window. If your plan is to flip or refinance quickly, factor this cost into your numbers before closing.
Investment properties only — DSCR loans are not available for primary residences. If you're buying a home to live in, you'll need a conventional, FHA, or VA loan instead.

💡 IS A DSCR LOAN RIGHT FOR YOUR INVESTMENT?

Run your numbers first

The answer depends on your property, your goals, and your timeline. Jenn Bailey at Unity Group Home Loans — our preferred lender — works with real estate investors regularly and can advise whether a DSCR loan fits your situation or whether a conventional investment loan makes more sense.

You can also find Jenn and other trusted lenders in our Vendor Directory.

OUR PREFERRED LENDER

Unity Group Home Loans

Jenn Bailey — Unity Group Home Loans

Jenn brings deep investment lending expertise alongside an experienced background contracting with the FBI — meaning your transaction is handled with the highest level of integrity. She works with military investors and self-employed buyers regularly and understands how to structure DSCR deals.

Educational content only — not a loan offer or commitment to lend. Rates and programs change daily. Confirm current terms with a licensed lender.

Infinity Family Properties & Associates, 15126 Sirius Circle, San Antonio, TX 78245. 737-392-2812

FREQUENTLY ASKED QUESTIONS

DSCR loans, answered

What is a DSCR loan and how does it work?

DSCR stands for Debt-Service Coverage Ratio. It's a type of investment property loan where the lender qualifies the loan based on the property's rental income — not your W-2s, tax returns, or personal income. The ratio is calculated as monthly rent divided by monthly mortgage payment (PITIA: Principal, Interest, Taxes, Insurance, and Association dues).

What DSCR ratio do lenders require?

Most lenders want a DSCR of 1.0 to 1.25 or higher. A ratio of 1.0 means the rent exactly covers the payment. A ratio of 1.25 means the rent covers the payment with 25% to spare, which gives lenders more confidence. A DSCR below 1.0 means the rent doesn't cover the payment — most lenders won't approve the loan at that ratio.

Who are DSCR loans best suited for?

DSCR loans are ideal for military investors buying rentals near bases (Central Texas has strong rental demand near JBSA, Fort Cavazos, and Randolph AFB), first-time real estate investors who don't want to show personal income, and self-employed buyers whose tax returns understate income due to aggressive write-offs.

What is the typical down payment for a DSCR loan?

Most DSCR lenders require 20–25% down on investment properties. This is more than a conventional loan, but the tradeoff is that no personal income verification, W-2s, pay stubs, or tax returns are required.

What are the risks of a DSCR loan?

Key risks include higher interest rates and larger down payments compared to conventional loans, the requirement that the property's cash flow must cover the payment (if rents drop you cover the gap out of pocket), prepayment penalties that are common with a typical 3–5 year window, and the fact that DSCR loans are for investment properties only — not primary residences.

What property types are eligible for DSCR loans?

Single-family homes, 2–4 unit properties, and condos are generally eligible for DSCR loans. These loans are for investment properties only — not primary residences. If you're buying a home to live in, you'll need a conventional, FHA, or VA loan instead.