DSCR loans allow real estate investors to finance rental properties without providing tax returns, W-2s, or any personal income documentation. Instead of verifying what you earn at a job or business, the lender qualifies the loan based entirely on the property's rental income relative to its debt payments. This makes DSCR loans the go-to financing tool for investors whose tax returns show losses due to depreciation, those who own too many properties for conventional financing, and anyone who wants to close in an LLC without the hassle of full income verification.
This guide covers everything you need to know about financing rental property without tax returns in 2026, including DSCR loan requirements, current rates, eligible property types, the application process, and strategies for scaling a portfolio using DSCR financing.
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What Is a DSCR Loan and How Does It Work?
A DSCR loan is a type of non-QM (non-qualified mortgage) investment property loan that uses the property's debt service coverage ratio to determine eligibility instead of the borrower's personal income. The debt service coverage ratio measures whether a property generates enough rental income to cover its loan payments, taxes, insurance, and HOA fees.
Here is the core formula:
DSCR = Annual Gross Rental Income / Annual Debt Service (PITIA)
PITIA stands for principal, interest, taxes, insurance, and association dues. If a property generates $36,000 per year in rent and the total annual PITIA is $28,800, the DSCR is 1.25x. That means the property produces 25% more income than needed to cover the mortgage, which meets the threshold for most DSCR lenders.
The key distinction from conventional loans is simple: conventional lenders look at your personal debt-to-income ratio and require two years of tax returns, W-2s, and employment verification. DSCR lenders do not care about any of that. They care about one thing: does this property cash flow?
For a complete breakdown of DSCR loan fundamentals, see our What Is a DSCR Loan guide.
Why Do Investors Choose DSCR Loans Over Conventional Financing?
Investors choose DSCR loans because conventional mortgage rules create significant barriers for portfolio growth. Fannie Mae and Freddie Mac limit borrowers to 10 financed properties, require full income documentation, and do not allow LLC vesting. For investors with five or more properties, depreciation write-offs that reduce taxable income on paper, or self-employment income that fluctuates, conventional financing becomes difficult or impossible.
DSCR loans solve these problems by removing income verification entirely. Here are the primary reasons investors prefer them:
Tax return write-offs reduce qualifying income. Real estate investors commonly use depreciation, repairs, and other deductions to minimize taxable income. This reduces your tax bill but also makes your tax returns show very little income, which disqualifies you from conventional loans. DSCR lenders ignore tax returns completely.
No property count limits. Conventional loans cap you at 10 financed properties. DSCR loans have no limit. Investors with 20, 50, or 100+ properties can keep acquiring rentals as long as each property meets the DSCR threshold.
LLC and entity vesting. Conventional loans require personal name vesting. DSCR loans allow LLC, land trust, or corporate vesting for liability protection.
Faster closings. Without income verification or IRS transcript requests, DSCR loans close in 21-30 days compared to 30-45 days for conventional loans.
What Are the Requirements for a DSCR Loan?
DSCR loan requirements center on the property's cash flow, your credit score, and your available reserves. While there is no income verification, lenders still underwrite the borrower's creditworthiness and the property's financial performance.
Here are the standard requirements for most DSCR lenders in 2026:
Minimum DSCR Ratio
Most lenders require a minimum DSCR of 1.0x to 1.25x. A 1.0x DSCR means the property breaks even, while 1.25x means it generates 25% more income than needed. Some lenders offer "no-ratio" programs where the DSCR is not calculated at all, though these carry higher rates and larger down payments.
Credit Score
The minimum credit score for most DSCR programs is 660, with the best rates reserved for 720+ scores. Each tier below 740 adds approximately 0.25-0.50% to the rate.
Down Payment and LTV
DSCR loans typically require 20-25% down (75-80% LTV). Some lenders offer 85% LTV for strong borrowers with 1.25x+ DSCR and 740+ credit, but 80% LTV is the standard maximum.
Cash Reserves
Lenders require 6-12 months of PITIA payments in liquid reserves after closing. Eligible reserves include checking accounts, money market funds, stocks, bonds, and retirement accounts (counted at 60-70% of value).
Property Requirements
The property must be an investment property (not owner-occupied), in rentable condition, and located in an eligible market with a minimum value of $100,000 to $150,000.
For a detailed breakdown of qualification criteria, visit our DSCR Loan Requirements page.
How Do You Calculate Your DSCR?
Calculating your DSCR before applying for a loan helps you understand where you stand and whether a property will qualify. The calculation is straightforward, but getting the inputs right matters.
Step-by-Step DSCR Calculation
Step 1: Determine Annual Gross Rental Income. Use the lesser of the actual lease amount or the appraiser's market rent estimate from the 1007 form. Most lenders use gross rent without deducting for vacancy or management fees.
Step 2: Calculate Annual Debt Service (PITIA). Add up principal, interest, property taxes, insurance, HOA fees, and flood insurance (if applicable).
Step 3: Divide Rental Income by Debt Service.
Example: A single-family rental in Dallas collects $2,200/month ($26,400/year). Monthly PITIA is $1,925 ($1,450 mortgage + $350 taxes + $125 insurance), totaling $23,100/year. DSCR = $26,400 / $23,100 = 1.14x.
This qualifies at Tier 2 terms. To reach Tier 1 pricing (1.25x+), the investor could increase rent, make a larger down payment, or shop for lower insurance rates.
Use our DSCR Calculator to run scenarios for any property you are evaluating.
What Interest Rates Can You Expect on a DSCR Loan?
DSCR loan rates in 2026 range from approximately 7.0% to 9.5%, depending on your credit score, DSCR ratio, LTV, and loan amount. These rates are typically 1.0-2.5% higher than conventional investment property rates, which reflects the reduced documentation and increased flexibility.
Four factors influence your specific rate:
Credit score is the biggest driver. Borrowers with 760+ scores access 7.0-7.25% rates, while 660 scores see 9.0-9.5%.
DSCR ratio impacts pricing. Properties with 1.25x+ DSCR receive better rates than those at 1.0x.
Loan-to-value matters. A 75% LTV loan prices better than 80% LTV because the lender has more equity cushion.
Prepayment penalties can reduce your rate. Accepting a 5-year stepdown instead of 3-year may lower your rate by 0.125-0.25%.
To estimate your monthly payment, use our Commercial Mortgage Calculator.
What Property Types Are Eligible for DSCR Loans?
DSCR loans cover a wide range of residential investment property types. Most lenders finance 1-4 unit properties, with some offering programs for small multifamily buildings up to 8 units. The property must be used as a rental (long-term or short-term) and cannot be owner-occupied.
Here is a breakdown of eligible property types and their typical DSCR performance:
Single-family rentals are the most common DSCR property type, with typical DSCRs of 1.10x to 1.30x depending on market and purchase price.
Duplexes, triplexes, and fourplexes offer higher cash flow because multiple units generate income against a single mortgage, frequently achieving 1.15x to 1.40x DSCRs.
Small multifamily (5-8 units) is available through select DSCR lenders but requires a commercial appraisal and additional underwriting scrutiny.
Condos and townhomes qualify, though HOA fees reduce the DSCR by increasing debt service. Factor monthly HOA dues into your calculation.
Short-term rentals (Airbnb, VRBO) are eligible with certain lenders. Some use projected income from AirDNA, while others require 12 months of rental history. STR DSCR loans carry slightly higher rates.
How Does the DSCR Loan Application Process Work?
The DSCR loan application process is simpler and faster than conventional financing because there is no income verification. From application to closing, expect 21-30 days for a straightforward purchase or refinance.
Here is what to expect at each stage:
Documentation You Will Need
Unlike conventional loans, the documentation list is short:
- Entity documents (if closing in an LLC): Articles of organization, operating agreement, EIN letter
- Bank or brokerage statements showing reserves (2 months of statements)
- Insurance quote for the subject property
- Purchase contract (for purchases) or current mortgage statement (for refinances)
- Lease agreement (if the property is currently rented)
- Photo ID and completed loan application
Notice what is missing from this list: no tax returns, no W-2s, no pay stubs, no profit-and-loss statements, and no employment verification letter.
The Appraisal and Rent Schedule
The appraisal is the most critical piece of the DSCR loan process. The appraiser provides the property value (determining LTV) and the market rent estimate (determining DSCR) via a 1007 Rent Schedule. If the appraised rent is lower than expected, you may need to increase your down payment, accept higher-rate pricing, or provide a signed lease showing actual rent above the estimate.
Closing and Funding
DSCR loans close through a standard title company or attorney. You will sign a note and mortgage, fund your down payment, and the property transfers into your name or LLC within 21-30 days from application.
Contact our team to get pre-qualified for a DSCR loan and find out your estimated rate and terms.
How Do DSCR Loans Compare to Bank Statement Loans?
DSCR loans and bank statement loans both serve borrowers who cannot or prefer not to provide tax returns, but they work differently and suit different situations.
Bank statement loans use 12-24 months of bank statements to calculate income. The lender analyzes deposits, applies an expense factor (typically 50% for business accounts), and uses the result as qualifying income. These loans require self-employment and can finance both primary residences and investment properties.
DSCR loans do not calculate borrower income at all. The property's rent-to-payment ratio is the sole qualifying metric, limited to investment properties only.
Choose a DSCR loan when you want the fastest closing and least documentation for a rental property. Choose a bank statement loan when you are self-employed with strong deposits or financing a primary residence.
What Strategies Do Investors Use to Scale with DSCR Loans?
DSCR loans are the backbone of many investors' portfolio growth strategies because they remove the income documentation bottleneck. Here are the most common approaches:
The BRRRR Strategy with DSCR Financing
BRRRR (Buy, Rehab, Rent, Refinance, Repeat) pairs perfectly with DSCR loans. Here is how it works:
- Purchase a below-market property using a bridge loan or cash
- Renovate to increase both value and rental income
- Lease the property to a qualified tenant
- Refinance into a DSCR loan at 75% of the new appraised value, pulling out most or all of your original capital
- Repeat with the recycled funds
The 6-month seasoning period required by most DSCR lenders means you need to wait at least 6 months from the purchase date before completing a cash-out refinance. During this time, the property should be leased and stabilized.
Portfolio Diversification
Because DSCR loans have no limit on the number of properties you can finance, investors use them to diversify across markets, property types, and price points. A common approach is acquiring 2-4 properties per year in different metros, spreading risk while building cash flow.
Rate-and-Term Refinancing
Investors who locked in DSCR loans at higher rates can refinance to lower rates as market conditions improve, without any income verification. This makes DSCR refinancing significantly easier than conventional refinancing, where you would need to re-document your entire income picture.
For more on DSCR refinancing options, see our DSCR page.
What Are the Drawbacks of DSCR Loans?
DSCR loans offer significant advantages, but they come with trade-offs that investors should understand before committing:
Higher interest rates. DSCR rates run 1.0-2.5% above conventional rates. On a $300,000 loan, that adds $250-$625 per month to your payment.
Prepayment penalties. Most DSCR loans include a 3-5 year prepayment penalty. Selling or refinancing early could cost 1-5% of the loan balance.
Larger down payment. DSCR loans start at 20% down and go up to 30% for lower credit scores, compared to 15-25% for conventional.
Limited to investment properties. DSCR loans cannot finance primary residences or second homes.
Rate adjustments. Some programs use adjustable rates after an initial fixed period (5/1 or 7/1 ARM). Confirm your loan structure before signing.
Despite these trade-offs, DSCR loans remain the most practical option for investors who cannot or prefer not to document personal income.
What Common Mistakes Should You Avoid with DSCR Loans?
Avoiding these pitfalls will save you time, money, and deal complications:
Overestimating rental income. The appraiser's market rent estimate, not your Zillow research, determines your qualifying DSCR. Get a broker price opinion or rental comp analysis before making an offer so you are not surprised by a low appraisal.
Ignoring reserves requirements. Running low on cash after closing is a rejection risk. Most lenders require 6-12 months of PITIA in reserves that remain in your accounts after the down payment and closing costs are paid.
Choosing the wrong lender. DSCR loan terms vary significantly between lenders. Rate differences of 0.50-1.0% are common for the same borrower profile. Always compare at least three lender quotes.
Forgetting about property condition. DSCR lenders require the property to be in rentable condition. Properties needing significant repairs may not qualify until renovations are complete. In that case, start with a bridge loan and refinance into DSCR after rehab.
Not factoring in all PITIA components. Taxes, insurance, and HOA fees all reduce your DSCR. A property that looks like it cash flows based on rent vs. mortgage payment alone may fall below 1.0x DSCR when the full PITIA is calculated.
Frequently Asked Questions
Can you get a rental property loan without showing tax returns?
Yes. DSCR loans are specifically designed for this purpose. They qualify borrowers based on the rental property's income relative to its debt payments, with no tax returns, W-2s, or employment verification required. As long as the property's DSCR meets the lender's minimum (typically 1.0x to 1.25x), your personal income documentation is irrelevant to the approval decision.
What is the minimum credit score for a DSCR loan?
Most DSCR lenders require a minimum credit score of 660. However, the best rates and terms are reserved for borrowers with scores of 720 or higher. Each credit tier below 740 typically adds 0.25-0.50% to your interest rate. Some lenders offer programs down to 620, but these carry significantly higher rates and may require 30%+ down payments.
How many properties can you finance with DSCR loans?
There is no limit on the number of properties you can finance with DSCR loans. Unlike conventional mortgages, which cap borrowers at 10 financed properties through Fannie Mae and Freddie Mac, DSCR lenders evaluate each property individually. Investors commonly hold 20, 50, or more DSCR loans simultaneously, provided each property meets the DSCR threshold and the borrower maintains adequate reserves.
Can you use a DSCR loan for a short-term rental or Airbnb?
Yes, many DSCR lenders allow short-term rental income to qualify the loan. Some lenders use projected income from platforms like AirDNA, while others require 12 months of actual rental history from your Airbnb or VRBO account. Short-term rental DSCR loans may carry slightly higher rates (0.25-0.50% premium) due to the perceived income volatility compared to long-term leases.
What happens if your property's DSCR falls below the minimum?
If your property's DSCR is below the lender's minimum, you have several options. You can make a larger down payment to reduce the loan amount and lower monthly payments, which raises the DSCR. You can also provide a signed lease at a higher rent if market conditions support it, or look for a lender offering no-ratio DSCR programs that do not require a minimum DSCR (though rates will be higher). Some investors also reduce insurance costs or contest property tax assessments to lower the PITIA component.
Clearhouse Lending specializes in DSCR loans for real estate investors nationwide. Whether you are purchasing your first rental property or scaling to 50 units, our team structures no-income-verification financing tailored to your investment strategy. No tax returns, no W-2s, no hassle. Schedule a free consultation to get pre-qualified and learn your estimated rate in 24 hours.