DSCR financing lets an investment property qualify on its own rental income instead of the borrower's personal tax returns.
How DSCR is calculated
Debt-service coverage ratio compares qualifying property income with the loan's required principal, interest, taxes, insurance and applicable association costs. A ratio above 1.00 means the property produces more qualifying income than the scheduled debt obligation. Required ratios vary by lender and property type.
What "no tax returns" really means
No-tax-return underwriting does not mean no documentation. A lender may still require a lease, market-rent analysis, appraisal, operating history, insurance, title work, entity documents, bank statements, reserves and borrower credit information. The difference is that approval is not primarily built on the borrower's personal taxable income. For a deeper look at how this compares to fully documented lending, review no-tax-return commercial loans.
Eligible property and transaction types
DSCR programs are commonly used for single-family rentals, 2–4 unit properties, vacation rentals and portfolios. Larger apartment properties usually move into commercial multifamily, agency or bank financing — explore multifamily financing if that fits your property. Purchase, rate-and-term refinance and cash-out options may be available. Investors financing a short-term or seasonal property can also explore vacation rental financing for details specific to that property type.
When DSCR is not the best fit
A conventional mortgage may offer better pricing to a borrower with easily documented personal income. A bridge loan may be better for a vacant or renovation-heavy property that has not stabilized. Market Capital Lending compares the property's actual condition and income strategy before choosing the program. To understand the tradeoffs in more depth, compare DSCR and conventional mortgages or read DSCR loans explained.
Market Capital Lending is a veteran-owned commercial lending firm based in Loganville, serving metro Atlanta and 46 states, with 40+ years of combined experience, $375M+ funded and access to a network of 40–50 lenders.