📊 DSCR Loans Explained: How Investors Qualify Without Tax Returns 🏠

🏢 What Is DSCR Lending? A 3-Minute Breakdown for Rental Property Investors 💰

February 06, 2026•2 min read

🏢 What Is DSCR Lending? A 3-Minute Breakdown for Rental Property Investors 💰

📊 DSCR Loans Explained: How Investors Qualify Without Tax Returns 🏠

What Is DSCR Lending? Explained in 3–5 Minutes

If you invest in 1–4 unit rental properties, chances are you’ve heard the term DSCR loan—but most investors don’t fully understand how it works or why it’s become one of the most powerful financing tools in today’s market.

Here’s the short version:

DSCR lending qualifies the loan based on the property’s income—not your personal income.

That’s exactly why DSCR loans are popular with real estate investors, self-employed borrowers, and short-term rental owners.

Let’s break it down quickly.

🔍 What Does DSCR Mean?

DSCR stands for Debt Service Coverage Ratio.

It measures how well a property’s income covers its mortgage payment.

Formula:
DSCR = Monthly Rental Income ÷ Monthly Housing Expense

Most lenders look for a DSCR between 1.00 and 1.25, depending on the loan program and property type.

🏘️ What Properties Qualify?

DSCR loans are designed for non-owner-occupied 1–4 unit properties, including:

·Long-term rentals (12-month leases)

·Short-term rentals (Airbnb / VRBO)

·Single-family rentals

·Condos and townhomes

·Small multifamily (2–4 units)

You do not need to live in the property.

📄 What Income Is Used?

This is where DSCR loans differ from traditional mortgages.

✔ Long-Term Rentals

·Qualify using current lease rent or market rent from an appraisal

✔ Short-Term Rentals

·Qualify using:

o12-month AirDNA projections, or

oDocumented short-term rental income

⚠️ Important:
Short-term rental DSCR loans typically require:

·Higher DSCR ratios

·Larger cash reserves

·Stricter underwriting

That’s the trade-off for using vacation rental income.

💳 Credit, Income & Documentation

DSCR loans are designed to be simple:

·No tax returns

·No W-2s

·No personal income calculation

·Credit scores typically 620–680+

·LLC ownership allowed in many cases

The property’s cash flow does the heavy lifting.

💰 Down Payment & Reserves

Typical requirements:

·20–25% down payment

·3–12 months reserves

·Higher reserves for short-term rental properties

Rates are generally higher than owner-occupied loans—but the flexibility is the real value.

🧠 Who Should Use DSCR Lending?

DSCR loans are ideal for:

·Real estate investors scaling portfolios

·Self-employed borrowers

·Short-term rental owners

·Clients writing off income on taxes

·Investors refinancing without income headaches

🎯 Final Takeaway

DSCR lending is one of the fastest ways to acquire or refinance rental property without income verification—as long as the deal makes sense on paper.

If the property cash flows, the loan works.

And structuring it correctly can save you time, money, and frustration.

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Bill Rapp - Commercial & Residential Mortgage Broker

Whether you're a first-time homebuyer, a seasoned investor, or a business owner with ambitious plans, securing the right financing is crucial. At Medallion Funds, we take the guesswork out of mortgages, offering a comprehensive suite of residential and commercial loan options to fit your unique needs. Looking for Your Dream Home? We understand the excitement and challenges of navigating the residential real estate market. Our experienced mortgage brokers will guide you through every step, from pre-qualification to closing. We offer a variety of loan programs to suit your financial situation, including: • Fixed-rate mortgages: Offering stability with predictable monthly payments. • Adjustable-rate mortgages (ARMs): Providing competitive rates for a set period. • FHA loans: Making homeownership accessible with lower down payments. • VA loans: Rewarding veterans with attractive rates and flexible terms. Investing in Your Business Future? Growth often requires capital, and we can help you unlock the potential of your commercial property. Our brokers specialize in a wide range of commercial loan options, including: • Purchase loans: Financing the acquisition of new buildings or land. • Construction loans: Facilitating the development of your project. • Refinance loans: Restructuring your existing mortgage for better terms. • SBA loans: Providing access to government-backed financing for qualified businesses. The Medallion Funds Difference: We go beyond simply finding a loan. We take the time to understand your goals and develop a personalized strategy. Here's what sets us apart: • Expertise: Our brokers have a deep understanding of both residential and commercial lending. • Competitive Rates: We leverage our strong lender relationships to secure the best possible terms. • Streamlined Process: We handle the paperwork, keeping you informed every step of the way. • Exceptional Service: We're committed to providing you with a positive and stress-free experience. Ready to Take the First Step? Contact Medallion Funds today for a free consultation. Let's discuss your financing needs and help you achieve your dreams!

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