The loan that ignores your W-2 on purpose
DSCR stands for Debt Service Coverage Ratio. Instead of qualifying you on personal income (tax returns, DTI, two years of 1040s), the lender looks at whether the property’s rent covers the property’s payment.
If you are self-employed, writing off everything, or already own several rentals, conventional underwriting will fight you. DSCR is built for that borrower. Joe uses it for investors in Minnesota, Florida, Arizona, Colorado, and the other states on his license list.
The formula
DSCR = monthly rental income ÷ monthly housing payment (PITI — principal, interest, taxes, insurance, and HOA if any).
Most programs want 1.00 or higher. Some want 1.10–1.25 for the best pricing. A few will stretch below 1.00 with more down payment or reserves.
Example: Market rent $2,500. PITI $2,000. DSCR = 1.25. That file is in good shape. Rent $2,000 and PITI $2,200? DSCR = 0.91. Possible with more down, a 40-year term, or a different property — not with hope.
What you typically need
- 20–25% down (some programs 15%; cash-out often 25–30% remaining equity).
- Credit often 660–680 minimum; 720+ prices better.
- Lease or a market-rent schedule (Form 1007) if vacant.
- Reserves: months of PITI in the bank, scaled to how many properties you already have.
- Entity vesting is commonly allowed (LLC).
What you typically do not need: personal tax returns, W-2s, or a debt-to-income calculation on your day job. That is the entire point.
DSCR vs. a traditional investment loan
| DSCR | Conventional investment | |
|---|---|---|
| Income docs | Rent / appraisal | 2 years tax returns |
| Personal DTI | Not used | Hard cap |
| Self-employed | Designed for it | Often painful |
| How many properties | Can scale past conventional’s 10-financed-property ceiling on many overlays | Fannie/Freddie caps |
| Terms | 30-year, 40-year, 7/1 ARM common | Usually 30-year / ARM |
| Rate | A bit higher than owner-occupied conventional | Often a little lower if you can qualify |
When DSCR is the wrong tool
If you have easy-to-document W-2 income, few properties, and 20% down, a conventional investment loan may price better. If the house does not rent for enough, DSCR will not save a bad deal — and it should not. We will tell you the cap rate is wrong before you pay for an appraisal.
Short-term (Airbnb) income is program-specific. Some DSCR lenders haircut it or want a 12-month history. Do not assume VRBO screenshots are a lease.
How fast?
Most DSCR files Joe runs close in about 3–4 weeks when the title is clean and the appraisal cooperates. No tax-return archaeology. If you already have an LLC, a property lined up, and 20% liquid, start the application and send the lease. We will tell you the ratio and the rate range the same day.
This article is for education only and is not a commitment to lend, a rate lock, or a guarantee of any program. Loan approval, rates, fees, and assistance amounts depend on the borrower, the property, the lender, and current guidelines. Programs and limits change. Joe Metzler, NMLS #274132, Cambria Mortgage. Equal Housing Lender. Licensed in AZ, CO, FL, IA, MN, ND, SD, and WI.
Talk through your scenario
Joe will tell you which program fits — and which one to skip.