Loan types
DSCR loan
An investment-property mortgage that qualifies on the property's rental cash flow — its debt-service coverage ratio — rather than the borrower's personal income or tax returns.
What does dscr loan mean?
DSCR stands for Debt-Service Coverage Ratio: the property's rental income divided by its mortgage payment. A DSCR loan approves on that ratio rather than your W-2s, so self-employed investors and those scaling a portfolio can qualify without income-documentation hurdles. Lenders usually want a ratio of 1.0–1.25 or better, 20–25% down, and reserves, with a rate about a point above owner-occupied. Michigan's investor markets — Detroit and Grand Rapids especially — draw national DSCR lenders because local rents relative to prices often produce strong coverage ratios.
Common questions
What DSCR ratio do lenders want?
Usually 1.0–1.25 or higher, meaning the rent covers the mortgage payment with a cushion. A ratio of 1.0 means rent exactly equals the payment.
Do DSCR loans check my personal income?
No — that's the point. They qualify on the property's rental cash flow, not your W-2s or tax returns, which suits self-employed and portfolio investors.
Are DSCR loans good in Michigan?
Often — Detroit and Grand Rapids rents relative to prices produce strong ratios. Because pricing varies widely, compare two or three quotes on the same property.
Related terms