What Is a DSCR Loan?
A DSCR loan — Debt Service Coverage Ratio loan — is a type of non-QM (non-qualified mortgage) designed specifically for real estate investors. It qualifies the borrower based on the rental property's cash flow, not the borrower's personal income. No W-2s. No tax returns. No pay stubs. No employment verification. The property earns the loan.
This makes DSCR loans the dominant financing tool for self-employed investors, portfolio builders, those with complex tax structures, LLC-titled properties, short-term rental operators, and foreign nationals — anyone whose personal income documentation doesn't reflect their true investment capacity.
At Sab Tera Lending, our DSCR rental loan program offers 30-year fixed terms starting at 6.5%, up to 80% LTV on purchases, in all nine of our service states: New York, New Jersey, Connecticut, Florida, Texas, North Carolina, South Carolina, Georgia, and Alabama.
"DSCR loans have become the #1 product for serious rental portfolio investors who want to scale without hitting the income verification wall — no personal income limits, no property caps, and qualifying in days rather than months."
As of 2026, DSCR loans account for roughly 28–29% of all non-QM mortgage originations nationally — making them the most important investor financing product in the market today. If you are a rental property investor and you are still using conventional loans, you are fighting with one hand tied behind your back.
How DSCR Is Calculated — With Interactive Calculator
The DSCR formula is simple:
DSCR = Monthly Gross Rental Income ÷ Monthly PITIA
Where PITIA = Principal + Interest + Taxes + Insurance + HOA (if applicable).
🧮 DSCR Loan Calculator
Enter your numbers to instantly see your property's Debt Service Coverage Ratio.
For vacant or newly purchased properties, lenders use the market rent figure from the appraiser's 1007 Rent Schedule — meaning you do not need existing tenants to qualify. You can buy vacant and still close on a DSCR loan.
DSCR Calculation Example
A single-family rental in Long Island, NY generates $3,200/month in rent. Monthly mortgage payment (P+I): $1,950. Taxes: $550. Insurance: $140. HOA: $0. Total PITIA = $2,640.
DSCR = $3,200 ÷ $2,640 = 1.21 — solid qualifying ratio that closes at standard terms.
DSCR Tiers: What Each Ratio Means for Your Loan
Not all DSCR ratios are equal. Here's what different DSCR levels mean for your loan terms, rate, and LTV:
| DSCR Ratio | Classification | Typical Max LTV | Rate Impact | Notes |
|---|---|---|---|---|
| 1.25+ | Strong | Up to 80% | Best pricing | Best rates, highest LTV, easiest approval |
| 1.10–1.24 | Good | 75–80% | Standard | Standard approval, competitive terms |
| 1.00–1.09 | Acceptable | 70–75% | Slightly higher | Break-even cash flow; qualifies with good credit |
| 0.75–0.99 | Sub-1.0 / No-Ratio | 60–70% | Higher | Requires 25–30%+ down, 700+ FICO; available in some programs |
| Below 0.75 | Negative Cash Flow | Case-by-case | Premium | Contact us — depends on market, equity, borrower profile |
The key insight: a higher DSCR doesn't just improve your rate — it also expands the LTV you can access, which directly affects how much cash you keep in the deal and how quickly you can recycle capital into your next acquisition.
Who Qualifies for a DSCR Loan?
DSCR loans were built for the investor that conventional lenders are failing. You are likely a strong DSCR candidate if you are in any of these categories:
Self-Employed Investors
Your tax returns show low income because you claim legitimate deductions. DSCR ignores your personal income entirely — only the property's rent matters.
Portfolio Builders
You've hit the Fannie Mae 10-property cap, or your DTI is stretched across multiple mortgages. DSCR has no portfolio limit and no DTI calculation.
LLC & Entity Borrowers
You want to hold rentals in an LLC for asset protection. DSCR loans are LLC-friendly — title in your entity, close under the entity name.
Foreign Nationals
No US income, no SSN, no ITIN? DSCR loans qualify on the property alone. Foreign national investors in our 9 service states are eligible.
Airbnb / STR Operators
Short-term rental income from Airbnb or VRBO is accepted. We use either market rent or annualized STR income data for qualification.
BRRRR Refinancers
You just finished a rehab, the property is rented, and you want to pull your capital out. A DSCR cash-out refi is the exit from your bridge loan.
Full DSCR Loan Requirements 2026 — Sab Tera Lending
Here are the complete qualification criteria for our DSCR rental loan program:
- Minimum Credit Score: 660 FICO (720+ for best rates and highest LTV)
- Minimum DSCR: 1.0 (sub-1.0 programs available on a case-by-case basis)
- Maximum LTV: 80% purchase / rate-term refi · 75% cash-out refi
- Minimum Down Payment: 20% for purchases (25% for cash-out refi)
- Loan Amount: $75,000 minimum (no formal upper limit)
- Loan Term: 30-year fixed (also available: 5/1 ARM, 7/1 ARM, interest-only periods)
- Income Docs Required: None — no W-2, no tax return, no pay stub, no employment verification
- Property Occupancy: Non-owner-occupied investment property only
- Cash Reserves: Typically 3–6 months of PITIA (varies by DSCR and LTV)
- Appraisal: Full 1004/1073 appraisal with 1007 Rent Schedule required
- Borrower Type: Individual, LLC, corporation, foreign national — all eligible
- Property States: NY, NJ, CT, FL, TX, NC, SC, GA, AL
Eligible Property Types for DSCR Loans
DSCR loans are available for residential investment properties with 1–4 units:
- Single-Family Rentals (SFR) — the most common DSCR loan property type; any 1-unit non-owner-occupied rental home
- Condominiums & Townhomes — warrantable and non-warrantable condo programs available; condo hotel properties may be eligible
- Duplexes (2-unit) — live in one, rent the other does not qualify (must be fully investment-use)
- Triplexes (3-unit) — all units must be investment; strong DSCR candidates due to multiple income streams
- Fourplexes (4-unit) — highest rental income and strongest DSCR potential in the 1–4 unit class
- Short-Term Rentals (Airbnb/VRBO) — STR income used for DSCR calculation in eligible markets; see STR section below
For 5+ unit properties, see our dedicated multifamily loan program which uses commercial DSCR underwriting. DSCR rental loans cover residential 1–4 unit investment properties only.
DSCR Loans vs. Conventional vs. Hard Money — Full Comparison
Understanding when to use each type of financing is the mark of a sophisticated investor. Here's a definitive side-by-side:
| Factor | DSCR Loan (Sab Tera) | Conventional (Fannie) | Hard Money / Bridge |
|---|---|---|---|
| Income Docs | None Required | W-2, Tax Returns, DTI | Usually None |
| Qualifying Metric | Property DSCR (Cash Flow) | Personal DTI Ratio | Property Value / LTV |
| Loan Term | 30-Year Fixed | 30-Year Fixed | 12–36 Months |
| Rate (2026) | 6.5%–8.0% | 6.0%–7.0% | 9.5%–13%+ |
| Max LTV Purchase | 80% | 75–80% | 65–75% |
| Property Limit | Unlimited | 10 Max | Unlimited |
| LLC Friendly | Yes | No | Yes |
| Close Timeline | 14–21 Days | 30–45 Days | 7–21 Days |
| Ideal Use Case | Long-term buy-and-hold rental | Simple W-2 investors (few properties) | Short-term: buy, fix, refinance |
| Vacant Property OK | Yes (market rent used) | No | Yes |
| Foreign National OK | Yes | No | Yes |
| Portfolio Scalability | Excellent — no cap | Poor — 10-property limit | Good — short term only |
The takeaway: Conventional loans are cheapest for simple W-2 investors with few properties. Hard money is fastest for acquisitions and rehabs. DSCR loans win on long-term buy-and-hold at scale — especially for anyone self-employed, in an LLC, or building a serious portfolio. Full comparison guide here →
DSCR Loans for LLCs and Foreign Nationals
Borrowing Under an LLC
One of the most powerful features of DSCR loans is their compatibility with LLC ownership. You can take title in your LLC, close the loan in your LLC's name, and maintain the legal separation between your personal assets and your rental portfolio. This provides meaningful liability protection — a critical concern for any investor with multiple properties.
Conventional Fannie Mae loans cannot close in an LLC. DSCR loans can. If you are building a portfolio and not using an LLC structure, you are taking on unnecessary personal exposure.
Requirements for LLC DSCR loans: the LLC must be the borrowing entity; a personal guarantee from the principal member(s) is required; LLC operating agreement and formation documents are needed at closing. The qualification itself — DSCR ratio, credit, reserves — remains the same as for individual borrowers.
Foreign National DSCR Loans
International real estate investors — including those from the UK, Canada, Brazil, Colombia, India, China, and across Europe — regularly purchase investment properties in our service markets, particularly in South Florida (Miami, Fort Lauderdale, Boca Raton) and New York. DSCR loans are the natural financing vehicle for foreign nationals because personal income documentation is irrelevant to the qualification.
Foreign national DSCR loan requirements typically include: valid passport, foreign credit reference or alternative credit history, US bank account for closing, and the standard property DSCR and appraisal. Contact us for current foreign national DSCR program availability in your target market.
DSCR Loans for Airbnb and Short-Term Rentals
The short-term rental market has created an entirely new category of DSCR borrower — investors who generate significantly higher gross income from Airbnb or VRBO than they would from a conventional long-term lease. A property in Miami Beach that rents for $2,400/month on a long-term lease might generate $5,000–$7,000/month in peak Airbnb revenue. That dramatic income difference transforms the DSCR calculation.
How STR Income Is Calculated for DSCR
For established short-term rental properties, lenders typically use one of three methods to determine qualifying income:
- Method 1 — 1007 Market Rent: The appraiser's long-term rental market analysis. Conservative but universally accepted.
- Method 2 — STR Income Average: 12-month trailing Airbnb/VRBO revenue (net of platform fees), divided by 12. Requires documentation from AirDNA, Mashvisor, or the platform's earnings report.
- Method 3 — AirDNA Projected Income: Market-rate projected STR income from AirDNA data for the specific address. Used for new STR listings without a 12-month history.
Which method to use depends on the lender program. Contact us to discuss your specific Airbnb property and market for the most favorable qualifying approach available.
DSCR Loans and the BRRRR Strategy — The Complete Cycle
BRRRR — Buy, Rehab, Rent, Refinance, Repeat — is the most powerful portfolio-building strategy in residential real estate. Sab Tera Lending supports every step of this cycle:
Buy
Acquire a distressed or undervalued property using a Sab Tera fix and flip loan (7-day close, up to 90% of purchase + 100% of rehab). Fast close wins the deal.
Rehab
Complete the renovation funded by your bridge loan's construction draw schedule. Bring the property to rent-ready condition and market value.
Rent
Place a qualified tenant (or list on Airbnb), establish the rent roll, and document the income. A lease in place or strong market rent comps set up the DSCR calculation.
Refinance
Refinance the bridge/hard money loan into a 30-year fixed DSCR rental loan with Sab Tera. No income verification. Pull cash-out equity based on the new as-is appraised value. Recycle your capital.
Repeat
Use the cash-out proceeds to fund the next acquisition. DSCR has no portfolio limit — each new property is evaluated independently. Run the cycle again and again.
The BRRRR + DSCR combination is how serious investors scale to 10, 20, or 50+ units without needing millions in fresh capital for each deal. The same equity gets recycled repeatedly through each cycle.
Best DSCR Loan Markets Across Our 9 Service States (2026)
DSCR qualification depends on local rent-to-price ratios. Markets with strong rental demand relative to purchase prices produce the best DSCR ratios. Here's our state-by-state breakdown for 2026: