What Is a DSCR Loan?
A DSCR loan — Debt Service Coverage Ratio loan — is a type of investment property mortgage that qualifies the borrower based on the rental property's income rather than the borrower's personal income. No W-2s. No tax returns. No pay stubs. The property's cash flow is the qualification.
This makes DSCR loans the preferred financing vehicle for self-employed investors, those with complex tax situations, and portfolio builders who have maxed out conventional loan limits. At Sab Tera Lending, our DSCR rental loans offer 30-year fixed terms from 6.5%, up to 80% LTV, in all nine of our service states.
"DSCR loans have become the #1 product for serious rental portfolio investors who want to scale without hitting the income verification wall at conventional banks."
How DSCR Is Calculated
DSCR = Monthly Gross Rental Income ÷ Monthly PITIA
PITIA = Principal + Interest + Taxes + Insurance + HOA (if applicable).
Example: A property generates $3,000/month rent. Monthly mortgage P+I = $1,800. Taxes = $400. Insurance = $150. HOA = $100. Total PITIA = $2,450. DSCR = $3,000 ÷ $2,450 = 1.22.
- DSCR above 1.25 — Strong. Best rates and highest LTV.
- DSCR 1.0–1.25 — Acceptable. Standard terms.
- DSCR below 1.0 — Negative cash flow. Some lenders can work with strong equity and borrower profile.
For vacant properties, we use market rent from the appraisal to calculate DSCR — meaning you don't need tenants in place to close your loan.
Who Qualifies for a DSCR Loan?
DSCR loans are ideal for:
- Self-employed investors whose tax returns show lower income due to legitimate deductions
- Portfolio investors who have maxed out Fannie/Freddie conventional loan limits (10 properties)
- W-2 investors who simply prefer to keep their investment borrowing separate from personal income
- Short-term rental operators (Airbnb, VRBO) qualifying on projected income
- Foreign nationals without US income documentation
Our requirements: minimum 660 FICO, non-owner-occupied investment property, minimum DSCR of 1.0 (exceptions available). See full program details →
DSCR Loans and the BRRRR Strategy
BRRRR — Buy, Rehab, Rent, Refinance, Repeat — is one of the most powerful wealth-building approaches in real estate. Here's how Sab Tera Lending supports the full cycle:
- Buy: Use a fix and flip loan to purchase the distressed property.
- Rehab: The fix and flip loan includes 100% of renovation costs.
- Rent: Stabilize the property and begin collecting rental income.
- Refinance: Refinance into a DSCR rental loan — no income verification, 30-year fixed term.
- Repeat: Use cash-out equity to fund your next acquisition.
This cycle allows investors to recycle the same capital repeatedly, building a rental portfolio without needing large amounts of fresh cash for each acquisition.
DSCR Loans vs. Conventional Rental Mortgages
Conventional rental mortgages (Fannie Mae investment loans) require 2 years of tax returns, W-2s or 1099s, full income documentation, and typically take 45+ days to close. You are also limited to 10 financed properties maximum.
DSCR loans have no income documentation requirement, no property limit, close in 14–21 days, and qualify on the property's cash flow. The trade-off is a slightly higher interest rate — typically 0.5%–1.5% above conventional rates. For serious portfolio builders, the flexibility and scalability far outweigh the small rate premium. Full comparison here →
Best DSCR Loan Markets in 2026
Strong DSCR markets combine reasonable purchase prices with strong rental demand:
- Long Island, NY — NYC overflow rental demand. 2–4 family properties produce excellent DSCR ratios.
- New Jersey — 1.6% vacancy rate. Bergen, Middlesex, and Monmouth counties are top DSCR performers.
- Florida — Short-term rental income for Airbnb properties qualifies for DSCR in vacation markets.
- Alabama — 8–12% gross rental yields. Huntsville, Birmingham, and Mobile are excellent cash flow markets.
- Texas — Houston, DFW, and San Antonio offer strong rent growth and improving DSCR ratios.