Question 1

What is a DSCR loan?

OGJW — DSCR & Investment Property Financing · Accepted Answer

A DSCR loan is an investment property mortgage that qualifies borrowers based on rental income rather than personal income verification. Industry-standard DSCR requirements typically include a minimum 1.0 DSCR ratio, and these loans are available in 36 states including Arizona, Texas, Florida, and Ohio. No W-2s or tax returns are required — the property's rent qualifies the loan.

Question 2

How to calculate DSCR for rental property?

OGJW — DSCR & Investment Property Financing · Accepted Answer

DSCR = Monthly Rental Income ÷ Monthly PITIA (Principal, Interest, Taxes, Insurance, Assessments). Example: $2,000 rent ÷ $1,800 PITIA = 1.11 DSCR. Across DSCR programs, ratios of 1.25+ generally qualify for the best rates. Use our free DSCR calculator at ogjw.com/calculators to model any deal instantly.

Question 3

What are DSCR loan requirements in 2026?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Most DSCR lenders require a 620+ credit score minimum (660–680 is the more typical practical minimum most lenders actually use, and 700+ unlocks the best pricing tiers), a 1.0+ DSCR ratio (1.25+ is considered strong), and 20–25% down for purchases. Loans are for investment property only (no primary residences). Available in 36 states. No W-2s or tax returns required. LLC ownership supported. No portfolio limit on number of properties.

Question 4

Which states have the best DSCR loan programs?

OGJW — DSCR & Investment Property Financing · Accepted Answer

DSCR loans are widely used across several investor-active states. In Ohio, the Columbus area is home to the Intel Ohio One semiconductor campus under construction in New Albany — a multi-year, long-term project (fabs now expected operational in 2030–2031), not a current rental-demand driver. Alabama's Huntsville anchors on NASA's Marshall Space Flight Center and Redstone Arsenal, and the state has one of the lowest average effective property tax rates in the country (roughly 0.38–0.42%). Indiana is commonly cited as landlord-friendly with a relatively fast eviction process and below-average property taxes. Texas has no state income tax and allows Series LLC structures, though its property tax rates run higher than the national average. Arizona supports STR qualification via AirDNA. We don't publish state-level cap rate ranges, as cap rate isn't a reliable standardized state metric.

Question 5

Can you get a DSCR loan with a 620 credit score?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Yes. Most DSCR lenders accept 620+ credit scores as a floor. 660–680 is the more typical practical minimum most lenders actually use, and 700+ unlocks the best pricing tiers, with 740+ sometimes unlocking interest-only options and the lowest available rates. Credit score tiers are a lender risk-tier decision, not tied to a specific state.

Question 6

What is a good DSCR ratio for investment property?

OGJW — DSCR & Investment Property Financing · Accepted Answer

1.25+ is considered strong and qualifies for most programs at competitive rates; 1.50+ is excellent and unlocks the best rates and interest-only options; 1.0–1.24 is marginal but may qualify with some lenders. Ratios below 1.0 mean the property's rent doesn't cover its mortgage — most programs disqualify below 1.0.

Question 7

What states offer DSCR loans?

OGJW — DSCR & Investment Property Financing · Accepted Answer

DSCR loans are available in 36 states and Washington D.C. Investor-active states include Texas, Florida, Arizona, Ohio, Indiana, Georgia, South Carolina, Tennessee, North Carolina, Colorado, Alabama, Oklahoma, Iowa, and Massachusetts. Some states (North Dakota, South Dakota, Nevada, Minnesota) have limited DSCR lender availability.

Question 8

What is a DSCR loan?

OGJW — DSCR & Investment Property Financing · Accepted Answer

A DSCR (Debt Service Coverage Ratio) loan is a mortgage designed for real estate investors where qualification is based on the rental property's income — not your personal income, W-2s, or tax returns. The property's rent divided by its monthly debt payments (PITIA) determines whether you qualify.

Question 9

What does DSCR stand for and how is it calculated?

OGJW — DSCR & Investment Property Financing · Accepted Answer

DSCR stands for Debt Service Coverage Ratio. It's calculated as: DSCR = Monthly Rental Income ÷ Monthly PITIA (Principal + Interest + Taxes + Insurance + Association dues). A DSCR of 1.25 means the property earns 25% more than its total monthly debt obligations.

Question 10

What is the minimum DSCR to qualify for a loan?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Most lenders require a minimum DSCR of 1.0 (break-even). A DSCR of 1.25 or higher is considered strong and typically unlocks better rates, more lender options, and lower down payment requirements.

Question 11

Do I need to show tax returns or W-2s for a DSCR loan?

OGJW — DSCR & Investment Property Financing · Accepted Answer

No. DSCR loans require no personal income documentation. Self-employed investors, business owners, retirees, and those with complex income structures all qualify on the property's rental income alone.

Question 12

What credit score do I need for a DSCR loan?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Most DSCR lenders require a minimum credit score of 620–640. The best rates and most program options are available at 700–720+. A score of 740+ typically unlocks the lowest available rates.

Question 13

How much do I need to put down for a DSCR loan?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Most DSCR loan programs require 20–25% down for purchases. Some programs allow 15–20% for strong DSCR properties. Cash-out refinances typically cap at 75% LTV, meaning at least 25% equity must remain.

Question 14

Can I buy a property in an LLC with a DSCR loan?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Yes — this is one of the biggest advantages of DSCR loans over conventional mortgages. Most DSCR lenders allow and support LLC ownership, which provides asset protection, tax flexibility, and privacy.

Question 15

Is there a limit on how many properties I can finance with DSCR loans?

OGJW — DSCR & Investment Property Financing · Accepted Answer

No. DSCR loans are non-QM products not subject to Fannie Mae/Freddie Mac limits. You can finance unlimited investment properties with DSCR loans — making them the preferred tool for portfolio investors who have maxed out conventional financing.

Question 16

What is the BRRRR strategy?

OGJW — DSCR & Investment Property Financing · Accepted Answer

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. Investors acquire undervalued properties, improve them, rent them at market rates, then do a DSCR cash-out refinance to extract equity. That equity funds the next acquisition — recycling capital to grow a portfolio without constantly adding fresh cash.

Question 17

What is a good cap rate for a rental property?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Cap rates above 6% are generally considered solid for cash flow. Cap rates vary by property, submarket, and deal — there is no reliable standardized state-level cap rate figure, so we don't publish state ranges. Coastal and Sun Belt tier-1 cities typically yield lower cap rates than Midwest and secondary markets — these are often appreciation plays rather than pure cash flow markets.

Question 18

What is cash-on-cash return and what's a good benchmark?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Cash-on-cash return = Annual Net Cash Flow ÷ Total Cash Invested. A return of 6–8% is generally considered good in today's market. Midwest and secondary markets can yield 8–12%. Coastal markets often produce 2–4% cash-on-cash due to high acquisition prices.

Question 19

What states have the best cash flow for rental property investors?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Ohio, Indiana, Iowa, Kansas, and Oklahoma are frequently cited by investors as cash-flow-oriented markets, with median home prices generally below the national median. We don't publish state-level cap rate ranges, as cap rate isn't a reliable standardized state metric. Check our Market Data hub for a full state-by-state comparison.

Question 20

What is house hacking?

OGJW — DSCR & Investment Property Financing · Accepted Answer

House hacking is purchasing a multi-unit property, living in one unit, and renting the others — using tenants' rent to cover most or all of your mortgage. A duplex in Columbus, Ohio might rent the second unit for $1,400/month on a $2,100 monthly mortgage, cutting your housing cost to $700. After 12 months, you can move out, convert it to a full rental, and refinance with a DSCR loan.

Question 21

When does a DSCR loan make more sense than a conventional loan?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Choose DSCR when: you're self-employed with complex income, you want to buy in an LLC, you already have 5+ financed properties, you want to close quickly with less documentation, or you're purchasing short-term rentals. Choose conventional when you have strong W-2 income, low DTI, and want the absolute lowest rate on your first 1–4 investment properties.

Question 22

How do I use the DSCR calculator?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Enter your property's monthly rental income, estimated loan amount, interest rate, and monthly taxes and insurance. The calculator instantly shows your DSCR ratio. A result of 1.25 or higher means you likely qualify for most DSCR loan programs with competitive rates.

Question 23

What rental income should I use in the DSCR calculator — actual rent or market rent?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Lenders use appraised market rent (from a 1007 Rent Schedule), not actual current rent. If your property is below market rent, the lender uses the higher market rent figure — which benefits investors acquiring undervalued properties. Use market comparable rents when modeling deals before purchase.

Question 24

What interest rate should I enter in the calculator?

OGJW — DSCR & Investment Property Financing · Accepted Answer

For purchase scenarios, DSCR rates in mid-2026 typically range from 7.25%–8.75% depending on credit score, down payment, and DSCR ratio. Use 7.75%–8.25% as a conservative planning assumption. For the most current rates, contact a DSCR loan specialist.

Question 25

What's included in PITIA for the DSCR calculation?

OGJW — DSCR & Investment Property Financing · Accepted Answer

PITIA = Principal + Interest + Taxes + Insurance + Association dues (HOA, if applicable). Be sure to include realistic monthly taxes and insurance — especially in markets with higher property taxes (Texas: 1.5–2.5%) or coastal wind/flood insurance (Florida, Louisiana).

Question 26

What is the cap rate calculator used for?

OGJW — DSCR & Investment Property Financing · Accepted Answer

The cap rate calculator measures a property's return independent of financing. It helps you compare properties across different markets and price points without the noise of different loan structures. A cap rate above 6% typically supports a DSCR of 1.25+ at 75% LTV.

Question 27

How does the Cash-on-Cash calculator differ from the DSCR calculator?

OGJW — DSCR & Investment Property Financing · Accepted Answer

The DSCR calculator tells you whether a lender will approve the loan. The Cash-on-Cash calculator tells you how well your invested capital is actually performing. Both matter: DSCR gets you the loan; Cash-on-Cash measures the quality of your investment decision.

Question 28

What is a DSCR cash-out refinance?

OGJW — DSCR & Investment Property Financing · Accepted Answer

A DSCR cash-out refinance replaces your existing rental property mortgage with a larger loan. The difference between the new loan and your current balance comes to you in cash — with no income documentation required. Most lenders allow up to 75% LTV on a cash-out refinance.

Question 29

How long do I need to own a property before doing a DSCR cash-out refinance?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Most DSCR lenders require 6–12 months of ownership (seasoning) before a cash-out refinance. Some lenders offer delayed financing exceptions for properties purchased with cash, allowing a faster cash-out cycle.

Question 30

Can I use cash-out proceeds as a down payment on another property?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Yes — this is the core of the BRRRR strategy. You extract equity from Property A via DSCR cash-out refinance, then use those funds as the down payment on Property B (financed with a new DSCR loan). This recycles capital without needing fresh investment funds.

Question 31

How do I use the Market Data hub to pick a target market?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Start by filtering the Market Data page by 'Cash Flow Leader' states — these have DSCR ratios of 1.25+ at 75% LTV, meaning easier loan qualification and genuine positive cash flow. Then drill into the state guides for city-by-city breakdowns, sample deal analyses, and submarket recommendations.

Question 32

Why do different states have such different DSCR ratios?

OGJW — DSCR & Investment Property Financing · Accepted Answer

DSCR ratios are driven by the rent-to-price ratio. States with affordable prices relative to rents (Ohio, Indiana, Iowa) produce high DSCR ratios. States with high prices relative to rents (California, Hawaii, Massachusetts) produce lower DSCR ratios — these markets require larger down payments, interest-only loans, or short-term rental income to qualify.

Question 33

Are there DSCR loan programs for short-term rentals (Airbnb)?

OGJW — DSCR & Investment Property Financing · Accepted Answer

Yes. Many DSCR lenders accept short-term rental income using AirDNA market data or 12+ months of actual Airbnb/VRBO history. The lender applies an occupancy factor (typically 65–75%) to projected revenue. Top STR DSCR markets include Colorado mountain towns, Louisiana (New Orleans), Hawaii, and Arizona (Scottsdale, Flagstaff).

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