Most real-estate investors hit the same wall: their tax returns show strategic losses (depreciation, legitimate business expenses), so their "income" on paper looks like a low-W-2 W-2 employee. Conventional underwriting cares. Conventional underwriting won't give you ten mortgages.
DSCR loans fix this.
What DSCR stands for
Debt-Service Coverage Ratio: rental income ÷ full PITI payment. If the property rents for $3,000/mo and the PITI is $2,400/mo, the DSCR is 1.25. Most DSCR lenders want 1.0 minimum (break-even cash flow); best pricing at 1.25+.
What DSCR underwriters actually want
- · 20-25% down payment (sometimes 30% for higher-risk properties).
- · 620+ credit (620 minimum, better pricing at 700+).
- · Property-level cash-flow documentation: signed lease OR 1007 Rent Schedule from the appraisal OR market rent analysis.
- · Clean title and no red-flag appraisal issues.
- · **Notably absent:** tax returns, W-2s, pay stubs, employment verification.
When DSCR makes sense
- · You own several properties and conventional DTI caps you out.
- · Your tax returns show strategic losses from depreciation.
- · You're self-employed with variable income that conventional underwriting hates.
- · You want to close fast — DSCR files underwrite in days, not weeks.
- · You're building a portfolio and need a program that scales.
When DSCR doesn't
- · Primary residence. DSCR is investment-only by definition.
- · Borderline cash flow (DSCR < 1.0) — you'll pay premium rate or get declined.
- · You have strong W-2 income and the property qualifies conventionally; conventional pricing beats DSCR by 1-2%.
The Alliance take
We run DSCR files routinely across our Non-QM wholesale panel. Rates run 1-2% above conventional 30-year fixed in normal markets. That premium is usually worth it once the portfolio is producing.
Ready to run one? Start the mortgage application and mark investment property.