DSCR loan
A rental loan that qualifies the property, not the borrower's income. The lender looks at whether the rent covers the mortgage, taxes, and insurance. Popular with investors who don't want to show W-2 income.
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Part 1 of 4
Why a seller cares
An investor buying your home as a rental may use a DSCR loan, which qualifies on the rent the home can earn rather than their income. The appraisal includes a rent estimate, and the deal can hinge on it.
Part 2 of 4
A simple example
An investor offers $250,000 for your duplex with a DSCR loan. The appraiser estimates market rent at $2,400 a month against a $2,000 payment.
| The rent estimate | What it does to the loan |
|---|---|
| $2,400 against a $2,000 payment | Ratio of 1.2; the loan approves |
| $1,900 against a $2,000 payment | Ratio under 1.0; the lender wants a bigger down payment or declines |
| No rent comps nearby | A slower appraisal and a less certain deal |
A DSCR buyer's loan depends on your home's rent, not their paycheck.
Part 3 of 4
What people get wrong
That a DSCR loan is cash-like because there is no income check. There is a rent check instead, and it can fail.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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