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Based on each lender's published information; we did not apply for loans.
DSCR loan pros and cons at a glance
| Pros | Cons |
|---|---|
| No personal income documents | About 20% down on purchases |
| Borrow in an LLC | Prepayment penalties are common |
| 30-year fixed terms, interest-only options | Investment property only; you cannot live in it |
| Some lenders accept a ratio below 1.0 | The lender decides which rent counts |
| No experience required at New Silver | Minimum loans of $50,000 to $150,000 and credit floors of 620 to 680 |
The pros
You qualify on the property, not your paycheck
Ternus says "No income docs, no W-2s, no tax returns"; Groundfloor says "No tax returns needed"; New Silver lists "No Income Verification". The loan is sized on whether the rent covers the payment, which helps self-employed investors and anyone whose tax returns show little income.
You can borrow in a business entity
LendingOne describes its DSCR loans as "Business-purpose loans, close under an LLC", and Ternus lends to an LLC, LP or corporation with an individual guarantor.
Long terms and flexible payments
Most programs offer 30-year fixed loans, and many add adjustable-rate and interest-only options (Kiavi, RCN Capital, LendingOne, Lima One, Ternus). Interest-only payments raise your ratio because the payment is lower.
Some lenders accept a ratio below 1.0
LendingOne and New Silver go as low as 0.75, Kiavi and CoreVest 0.8, and Upright 0.90 on long-term rentals; Easy Street Capital and Griffin Funding publish no minimum. Compare every minimum on the DSCR ratio page.
No experience required at New Silver
New Silver's DSCR page says prior experience is not required.
The cons
A bigger down payment
Most lenders cap purchases at 80% of value, so plan on 20% down. Ternus says 20% to 25% on purchases. Griffin Funding goes to 15% down, but only at 740+ credit.
Prepayment penalties
Step-down penalties are common: Easy Street Capital's typical 5/4/3/2/1 charges 5% of the remaining balance in year one, then less each year. Shorter or no penalties can cost more: Lima One charges a higher fee or rate for them, and Griffin Funding prices the rate by penalty term.
Investment property only
DSCR loans are for rentals. Easy Street Capital says occupying the property is strictly prohibited, and LendingOne and Express Capital Financing say the same of primary residences. See owner-occupied loans for why.
The rent figure is the lender's, not yours
Lenders may count market rent from the appraisal rather than your lease, and short-term rental income is counted differently again (see DSCR loans for short-term rentals). A ratio you calculate can fall short at underwriting.
Minimum loan sizes and credit floors
Published minimum loans run from $50,000 (Express Capital Financing) to $150,000 (New Silver), which can rule out low-priced rentals. Credit minimums run from 620 (Griffin Funding) to 680 (Visio Lending), and RCN Capital lowers its maximum loan-to-value below 700.
Are DSCR loans worth it?
They fit best when the rent clearly covers the payment, you want the loan in an entity or cannot document income easily, and you plan to hold for years. They fit worst when you might sell soon (prepayment penalty), the property is cheap (minimum loan) or you plan to live in it. Run the property through the DSCR calculator, then compare lenders on the DSCR loans page.
Related guides
Weighing a conventional loan instead? See DSCR loan vs conventional loan and DSCR loan rates.
Frequently asked questions
What are the disadvantages of a DSCR loan?
A larger down payment (most lenders cap purchases at 80% of value), common prepayment penalties such as 5/4/3/2/1, investment property only, minimum loan sizes of $50,000 to $150,000, and qualifying on the lender's rent figure rather than yours.
What are the benefits of a DSCR loan?
You qualify on the property's rent instead of personal income documents, can borrow in an LLC, get 30-year fixed or interest-only terms, and at some lenders can qualify with a ratio below 1.0.
Are DSCR loans worth it?
For a rental you plan to hold, whose rent covers the payment, and especially if your tax returns understate your income, often yes. If you might sell within a few years, check the prepayment penalty first.
Can I live in a property with a DSCR loan?
No. DSCR loans are for investment properties; Easy Street Capital says occupying the property is strictly prohibited.