A DSCR loan is a loan for an investment property that is underwritten based on DSCR, rather than personal income. DSCR or Debt-Service Coverage ratio is a tool to help lenders understand a borrower's ability to pay back a loan based on the monthly rent of the property. DSCR loans are fantastic for self-employed investors or investors with multiple mortgaged rental properties.
DSCR loans are an option that have grown in popularity recently due to their use of rental income rather than personal income to evaluate whether you qualify or not. They can also be more cost-effective than hard money loans for financing an investment property.
Qualifications vary based on lenders, but typically you will need a minimum of 25% down payment, a minimum credit score of 680, and a minimum DSCR of 1.2.
The simplest way to improve your DSCR is to put more money down, however you can also shop insurance, fight property taxes annually, and charge more rent.