The ratio, with real numbers
DSCR = monthly rent ÷ full monthly payment (PITIA). A property renting for $3,000 with a $2,400 all-in payment carries a DSCR of 1.25 — a dollar of rent for every 80 cents of payment, and the number where many lenders' best pricing starts. At $2,900 of payment the ratio is ~1.03: technically financeable at many shops, but with no cushion for vacancy, repairs, or an insurance repricing — the loan works until the first surprise.
| Requirement | Typical 2026 range | Notes |
|---|---|---|
| Minimum DSCR | 1.0–1.25 | 1.25+ unlocks the best pricing; sub-1.0 “no-ratio” programs exist at higher cost |
| Down payment | 20–25% | 15% programs exist for exceptional files (740+ scores, strong ratios) |
| Credit score | 680+ typical | Floors near 620 with compensating factors; 700+ prices noticeably better |
| Property | 1–4 unit rentals | Stabilized, non-owner-occupied — always. Vacant units use appraiser market rent |
What you skip — and who that matters for
No tax returns. No W-2s or paystubs. No personal DTI math. The property qualifies; you mostly just need the credit score, the down payment, and reserves. If you've read our self-employed buyer's guide, you know the ordinary pain: write-offs that lower taxable income also shrink the income a lender counts. DSCR loans route around that entirely — which is why they've become the default scaling tool for self-employed landlords and anyone past the handful-of-properties point where conventional investor loans get restrictive.
Two structural conveniences worth knowing: most DSCR lenders will lend to your LLC (ask about personal guaranties — usually still required), and financed-property counts that block conventional borrowers usually don't apply.
The fine print that pays for all this
- Rate: expect meaningfully above conventional investor pricing — the premium is the price of not documenting income. Get live quotes; DSCR pricing moves with the same market everything else does.
- Prepayment penalties are standard, not an edge case: typically 3–5 years, often a step-down (5-4-3-2-1: sell or refinance in year one, pay 5% of the balance; year two, 4%; and so on). You can usually buy the penalty shorter or off — for a higher rate. If your plan is a value-add refinance in year two, that buydown may be the most important line in the quote.
- Reserves: commonly a few months of payments in the bank after closing; varies by lender and portfolio size.
- Short-term rental income: some lenders count it (often from actual 12-month history or a specialized appraisal analysis), many haircut it, some refuse it. If the deal only works on nightly rates, ask this question first.
DSCR vs. the alternatives
| Conventional investor loan | DSCR | Hard money | |
|---|---|---|---|
| Qualifies on | Your income + DTI | Property's rent | Equity + exit plan |
| Income docs | Full (returns, W-2s) | None | Minimal |
| Typical cost | Lowest | Middle | Highest (see the hard money guide) |
| Term | 30 years | 30 years | 6–24 months |
| Best for | W-2 borrowers, few properties | Self-employed, scaling landlords | Flips, bridges, speed |
The common sequence for value-add investors runs left to right in reverse: hard money to buy and renovate, then a DSCR refinance once the property rents (the flip guide covers the exit mechanics) — which is exactly when the prepayment-penalty term on the DSCR loan starts mattering.
Making the ratio work
When a deal's DSCR comes up short, the levers are mechanical: a larger down payment (smaller payment, higher ratio), buying the rate down, a cheaper insurance quote (shop it — California premiums swing the ratio more than people expect), or honestly, a better-renting property. Run the ratio yourself before any lender does: list the real PITIA — including HOA and a realistic California insurance number — against the rent an appraiser would actually support, not the rent you hope for. Cash flow analysis on aggregates and asking rents is estimation you can do; what a specific property is worth is an appraiser's job, and what it will rent for is the market's.