Complete DSCR Loan Guide
Written by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
A DSCR loan is an investment property mortgage that qualifies you on the property's rental income rather than your personal income. DSCR stands for debt service coverage ratio, the measure of whether the rent covers the mortgage payment. It is the go-to loan for Florida real estate investors who want to scale without W-2 documentation.
This guide explains how DSCR loans work, how the ratio is calculated, and what it takes to close on a Florida rental. Mortgage Capital, NMLS# 1859012, funds DSCR loans on long-term and short-term rentals statewide.
How DSCR loans work
A DSCR lender looks at the property, not your tax returns. If the projected or actual rent covers the mortgage, taxes, insurance, and any HOA dues, the loan can qualify. There is no personal debt-to-income calculation.
This makes DSCR ideal for self-employed investors, those with many properties, or anyone whose tax returns understate their true cash flow.
Calculating the debt service coverage ratio
The ratio divides the property's monthly rent by its total monthly payment, including principal, interest, taxes, insurance, and HOA. A ratio of 1.0 means rent exactly covers the payment; above 1.0 means positive cash flow.
Most lenders want a ratio of 1.0 to 1.25, though some allow ratios below 1.0 with a larger down payment. We model the numbers before you make an offer.
Down payment and credit
DSCR loans usually require 20% to 25% down. Credit matters for pricing, with the best terms above 700, but the property's performance drives approval.
Because the loan is qualified on the asset, you can hold these mortgages in an LLC, which many Florida investors prefer for liability and tax planning.
Short-term rentals and Florida markets
DSCR loans work for both long-term leases and short-term vacation rentals, which are common in Florida tourist markets. For short-term rentals, lenders may use market rent data or a documented operating history.
Florida's strong rental demand, from Orlando to the Gulf Coast, makes DSCR a practical tool for building a rental portfolio.
Rates, reserves, and costs
DSCR rates run higher than owner-occupied loans because they are investment financing. Expect to document reserves of several months of payments. Closing costs mirror other mortgages plus investor-specific fees.
Prepayment penalties are common on DSCR loans, so review the structure if you plan to refinance or sell within a few years.
Complete DSCR Loan Guide: step by step
Frequently asked questions
What is a DSCR loan?
An investment property loan qualified on the property's rental income rather than your personal income or tax returns.
What DSCR ratio do I need?
Most lenders want 1.0 to 1.25, meaning rent covers the full payment. Some allow lower ratios with more money down.
How much down do I need for a DSCR loan?
Typically 20% to 25%, depending on the ratio, credit, and property type.
Can I use a DSCR loan for a short-term rental?
Yes. DSCR loans work for Airbnb and vacation rentals using market rent data or a documented operating history.
Can I close a DSCR loan in an LLC?
Yes. Because the loan is qualified on the asset, many investors hold DSCR loans in an LLC.
Do DSCR loans check my income?
No personal debt-to-income calculation is required. The property's cash flow drives approval.
Are there prepayment penalties on DSCR loans?
Often yes. Review the prepayment structure if you plan to sell or refinance within a few years.
What credit score do I need for a DSCR loan?
Pricing improves above 700, but approval is driven by the property. Lower scores can still qualify with more down.