Cut to the chase
What is a DSCR loan? It is a rental property loan that qualifies you on the property's rent instead of your personal income. The lender divides the monthly rent by the monthly payment (principal, interest, taxes, insurance and association dues), and a result above 1.0 means the rent covers the payment.
At a glance
- DSCR = monthly rent ÷ monthly PITIA. Rent of $2,400 against a $1,850 payment gives a DSCR of 1.30.
- HWC's DSCR program asks for no tax returns, W-2s, pay stubs or DTI calculation.
- HWC offers a 30-year fixed term and a 15-year term with 15-year amortization.
- HWC lends up to 80% LTV on purchases and rate-and-term refinances, and up to 75% on cash-out refinances.
- Minimum FICO is 680, with exceptions considered down to 660. Minimum property value is $100,000.
- Eligible properties include single-family and 2 to 10 unit rentals, including short-term rentals, owned personally or through an LLC.
Summarize with AI: ChatGPT · Perplexity · Claude · Add HWC to Google Preferred Sources
What is a DSCR loan?
DSCR stands for debt service coverage ratio. A DSCR loan is a business-purpose mortgage on a rental property, and the lender approves it mainly on whether the property's rent can cover its monthly payment.
A bank investor loan starts with you: your tax returns, your W-2s and your debt-to-income ratio. A DSCR loan starts with the property. That is why self-employed investors, people with large write-offs on their returns, and investors who already own several rentals often use DSCR financing.
Your credit, reserves and the property itself still matter. The difference is that your personal income is not the qualifying number.
How the DSCR formula works
DSCR = Monthly rent ÷ Monthly PITIA
PITIA is the full monthly housing payment: principal, interest, property taxes, insurance and association dues. To work out your own ratio:
- Find the monthly rent. Use the signed lease or, for a vacant property, the appraiser's market rent estimate.
- Add up the monthly payment: principal and interest on the new loan, plus one-twelfth of annual taxes and insurance, plus any HOA or condo dues.
- Divide the rent by the payment.
- Read the result. Above 1.0 means the rent covers the payment. At 1.0 it breaks even. Below 1.0 the payment costs more than the rent brings in.
Lenders set their own minimums and price the loan off the ratio. Lower notes that formulas, minimum ratios and pricing adjustments vary from lender to lender, so ask each lender which costs it counts in PITIA.
A worked example
The numbers below match the calculator on HWC's DSCR loans page. They are illustrative, not a quote.
| Scenario | Monthly rent | Monthly PITIA | DSCR | What it means |
|---|---|---|---|---|
| Base case | $2,400 | $1,850 | 1.30 | Rent covers the payment with $550 a month to spare |
| Rent drops to $1,850 | $1,850 | $1,850 | 1.00 | Break-even |
| Rent drops to $1,750 | $1,750 | $1,850 | 0.95 | Payment is $100 a month more than rent |
If the ratio comes in low, you have three levers: a larger down payment lowers the principal and interest, a lower rate cuts the payment, and a higher-rent property raises the top of the equation.
How lenders measure rental income
The rent figure is where most DSCR files are won or lost. HWC's DSCR page asks for an executed lease showing the rental income. On a purchase or a vacant unit, lenders commonly use the appraiser's market rent instead.
For single-family rentals, appraisers usually report market rent on Fannie Mae Form 1007, the Single-Family Comparable Rent Schedule. The appraiser compares rents on similar nearby properties and gives an estimate of the subject property's monthly rent.
Have a rental in mind?
Send HWC the address, the rent and your target loan amount. A loan officer can tell you where your DSCR lands and what the loan could look like.
Get your DSCR quote · or call 1-800-674-3804
DSCR vs. conventional investor loans
| What the lender checks | DSCR loan | Conventional investor loan |
|---|---|---|
| Main qualifying number | Property rent vs. payment | Your personal income and DTI |
| Tax returns and W-2s | Not required at HWC | Required |
| Who can borrow | Individuals or LLCs at HWC | Usually individuals |
| Typical cost | Often a higher rate and larger down payment | Usually lower |
| Best for | Self-employed investors, growing portfolios, LLC owners | W-2 earners with low debt and few properties |
The cost row reflects general market guidance. Benzinga puts typical DSCR down payments at about 20% to 25% and says rates usually run higher than conventional loans. Your real numbers come from the quote.
HWC DSCR loan terms
These are the program terms published on HWC's DSCR loans page. Final terms depend on underwriting.
| Term | HWC DSCR program |
|---|---|
| Loan term, option 1 | 30-year fixed, no call |
| Loan term, option 2 | 15-year term with 15-year amortization |
| Max LTV, purchase | 80% |
| Max LTV, rate-and-term refinance | 80% |
| Max LTV, cash-out refinance | 75% |
| Minimum FICO | 680; exceptions considered to 660 |
| Minimum property value | $100,000 |
| Property types | Single-family and 2 to 10 unit rentals, including short-term rentals |
| Borrower | Individual or LLC |
| Prepayment | Declining options such as 3-2-1 or 5-4-3-2-1; zero-penalty options available |
Who a DSCR loan fits, and who it doesn't
A DSCR loan works well when:
- Your tax returns understate your real income because of write-offs or self-employment.
- You already own several rentals and conventional lenders have hit their limit on you. Rental portfolio loans are built for that stage.
- You want to hold the property in an LLC.
- You are refinancing out of a short-term rehab loan once the property is rented. HWC's hard money loans page describes exactly that exit. Planning the flip first? See how much cash you need to close a 100% LTC loan.
It is a weaker fit when the property will be your own home, since HWC lends for business purposes only, or when the rent barely covers the payment and you have little cash in reserve.
If you plan to pull equity out of a rental you own, see our cash-out refinance program. To see how DSCR compares with every other option, use our loan programs comparison.
How to apply for a DSCR loan with HWC
- Send the deal. Share the property address, purchase price or value, rent and the loan you want through the prequalify form.
- Complete the one-page application.
- Upload the documents. An executed lease showing rental income, proof of property insurance, the purchase settlement statement, a valid ID, two months of bank statements, and entity documents with a W-9 if you borrow through an LLC.
- Review the terms. Confirm the rate, LTV, prepayment option and cash needed at closing before you commit.
- Close. Title in your own name or your LLC's name.
Find out where your DSCR lands
HWC funds 30-year and 15-year DSCR rental loans in all 50 states and D.C., including Texas, Florida, Georgia, North Carolina and Massachusetts. Tell us about the property and we'll price it.
Related loan programs
DSCR Loans
30-year fixed rental loans qualified on rent, up to 80% LTV.
Cash-Out Refinance
Pull equity from a rental you own, up to 75% LTV.
Rental Portfolio Loans
Finance several rentals under one loan.
Sources
- Hedge Wealth Capital, DSCR Loans program page
- Fannie Mae, Form 1007 Single-Family Comparable Rent Schedule
- Lower, What Is a DSCR Loan?
- Benzinga, What Is a DSCR Mortgage Loan?
This article is general information, not a commitment to lend. Financing is subject to underwriting, property eligibility, program availability and final loan terms. Examples are illustrative. Rates, fees, leverage and terms vary by transaction.
