DSCR Loan Pros and Cons – Must to Know by Realtors

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DSCR Loan pros and cons – DSCR (Debt Service Coverage Ratio) is the type of loan for real estate investors. This DSCR loan helps to cover the debt. 

You know what?

DSCR loan allows borrowers to qualify for the loan based on their cash flow generated through real estate business. If you need to deal funds with the real estate then DSCR loan is the only option to do in an excellent way.

Exact Formula for DSCR = Net Operating Income / Debt Services

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DSCR Loan Pros and Cons

DSCR Loan Pros and Cons

Getting DSCR Loan is easy for realtor business people and you need to know it pros and cons before getting this type of DSCR loans,

Here are the pros and cons,

DSCR Loan Pros

The DSCR Loan Pros are,

  • No Income Verification needed to apply for DSCR Loan.
  • There is no Property Limit to apply for DSCR Loan.
  • No employment checking in DSCR Loan.
  • You can buy multiple properties at the same time.
  • A DSCR loan won’t interfere with your personal finance.
  • Important a) Personal verification is not needed to apply for DSCR Loan. b) No reserves required.
  • DSCR Loan offers quicker closing time.
  • All types of rental programs eligible in DSCR Loan (short term rental, Long term rental, multi family property even single property also).

DSCR Loan Cons

  • To get a DSCR Loan for your business you need to pay a higher down payment ( 20% – 25% ).
  • Compared to other home loans, Debt Service Coverage Ratio (DSCR) has high interest rates.
  • To get a DSCR loan your FICO score must be a minimum 620+.
  • Penalty will be charged for late payment borrowers.
  • You need to pay the lender’s fee.
  • Compared to other financial loan providers, DSCR will offer less financing from $2 Million to $5Million. 
  • DSCR Loans mostly have 75% to 80%.
  • Compared to traditional mortgage loans, DSCR has high interest rates.

What is a DSCR Loan?

What is a DSCR Loan?

DSCR (Debt Service Coverage Ratio) helps to make it easy for borrowers to qualify for investment property loans. It will be completely based on rental income, cash flows. These loans do not consider your personal income or job history.

DSCR is the metric that helps lenders to check your ability to repay your loan amount. 

You know what?

Real estate investors 90% mostly have lower net income after paying their taxes. It will affect them to get loans from any banks or conventional loans.

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DSCR Loan Overview

DSCR Loan Rates

IMG Source : myperfectmortgage.com

If you are ready to get a DSCR Loan for your real estate business, you need to know some overview of the loan recommendations and other stuff.

  • Minimum Loan Amount – $1,00,000
  • Maximum Loan Amount –  $2,000,000
  • Interest rates – 7.5% + (Based on loan terms it will differ)
  • Term of Loan – 30 years
  • Minimum FICO Scores – 640+
  • Loan to purchase price – up to 79%
  • Loan to value – up to 79%
  • Origination fee – 2 – 3 %

How does DSCR Work?

You know what?

DSCR loan is mostly used by investors only, This Loan is not used for purchasing a primary residence.

Instead, this loan is used to purchase small and long term rental properties like homes, condos, apartments. DSCR gives the accurate report for lenders, if they are able to repay the loan amount or not by using rental income.


If your DSCR loan is 1, lenders are able to trust the borrowers can easily repay their loan amount. You know what?

Most lenders need 1.25 DSCR to give loans for people, because if you have DSCR 1, then there are some expenses like repairs and maintenance.

Benefits of DSCR Loan?

Benefits of DSCR Loan?
  • If you are a Property investor you can easily qualify for a DSCR Loan.
  • No need to submit your personal information to apply for DSCR Loan, only less documentation is required to apply. This will save more time for lenders.
  • Compared to conventional loans, DSCR Loan is much faster in the application process.
  • If you are an investor you can easily invest in multiple properties at once with the help of DSCR Loan.
  • DSCR loan is used for both short term rental properties and long term properties.

Wrap up

If you are planning to get the loan from DSCR, then you made the right choice. Yes, getting a DSCR loan  for your real estate business is really a good one.

If you are interested in getting a DSCR loan, please comment below.


What is the DSCR loan rate?

Now, the DSCR Loan rate is 7.2% for 30 years with 25% down and 1.2% ratio in DSCR.

Can anyone get a DSCR loan?

No, to get DSCR Loan, you need to have minimum 640+ credit scores and you need to have above DSCR 1 ratio.

Do banks give DSCR Loans?

No, mostly DSCR Loan available in private lenders.

What are the DSCR rates for 2023?

The DSCR Loan interest rate in 2023 is 7.59% – 8.59%.

What is an alternative to DSCR?

LLCR (Loan Life Coverage Ratio) is an alternative to DSCR Loan.

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