Question 1

What is a DSCR loan?

Accepted Answer

A DSCR (Debt Service Coverage Ratio) loan is a business-purpose loan for real estate investors that qualifies based on the property's rental income rather than the borrower's personal income. The DSCR ratio is calculated as Net Operating Income divided by Total Debt Service. Ratios of 1.25x or higher are typically preferred by wholesale lenders.

Question 2

How is DSCR calculated?

Accepted Answer

DSCR = Net Operating Income (NOI) / Total Debt Service. NOI is your gross rental income minus operating expenses (property taxes, insurance, HOA, maintenance). Total debt service includes your monthly mortgage payment (PITI: principal, interest, taxes, insurance). A DSCR above 1.0 means the property generates enough income to cover its debt.

Question 3

What DSCR ratio do I need to qualify?

Accepted Answer

Most wholesale lenders prefer a DSCR of 1.25x or higher, though some programs accept ratios as low as 1.0x for strong files. Higher ratios (1.50x+) typically qualify for better rates and terms. The exact requirement depends on the lender, property type, loan amount, and your overall financial profile.

Question 4

Do I need to provide tax returns for a DSCR loan?

Accepted Answer

No. One of the primary benefits of DSCR loans is that they don't require personal tax return documentation. Qualification is based on the property's cash flow, not your personal income. This makes DSCR loans ideal for self-employed investors, those with complex tax situations, or investors who want to keep their personal financial details private.

Question 5

What property types are eligible for DSCR loans?

Accepted Answer

DSCR loans are available for non-owner-occupied investment properties including single-family homes, condos, townhomes, 2-4 unit multifamily, 5+ unit apartment buildings, and certain commercial properties. The property must be used for business/investment purposes. Owner-occupied homes, second homes, and vacation properties used personally are not eligible.

Question 6

How fast can I close a DSCR loan?

Accepted Answer

DSCR loans typically close in 14-30 days, significantly faster than conventional mortgages which often take 45-60 days. The streamlined process is possible because there's no personal income verification, no tax return review, and simplified underwriting focused on the property's cash flow. Some lenders can close in as few as 10-14 days for straightforward deals.

Question 7

What's the typical down payment for a DSCR loan?

Accepted Answer

Most DSCR loans require 20-25% down payment (75-80% LTV). Some programs may accept as low as 15% down for strong borrowers with excellent credit and high DSCR ratios. Investment property loans generally require more equity than owner-occupied mortgages because of the higher risk profile.

Question 8

Can I use an LLC to take title on a DSCR loan?

Accepted Answer

Yes, most DSCR lenders allow LLC vesting, which is a major advantage for real estate investors. Taking title in an LLC name provides asset protection and can offer tax benefits. The LLC must typically be formed before closing, and you'll need to provide the LLC's operating agreement and EIN.

Question 9

What are typical interest rates for DSCR loans?

Accepted Answer

Pricing is scenario-specific and changes with wholesale market conditions. A current review considers credit profile, DSCR, leverage, property type, loan purpose, reserves, documentation, and lender requirements. Loan Daddy LLC does not publish or promise pricing; request a written business-purpose scenario review for current terms.

Question 10

Is Loan Daddy LLC a lender?

Accepted Answer

No. Loan Daddy LLC (Company NMLS #2827624, AZ CMB Licensed · #CMB-2016143) is a business-purpose loan broker, not a lender. We connect qualified real estate investors with authorized wholesale lending partners who fund DSCR loans. We do not make, fund, underwrite, approve, or deny loans. All lending decisions are made by our wholesale lender partners.

Guideline Dimension	DSCR Rental Loan	Private Money Bridge	Conventional Investment
Primary Qualification	Property rental cash flow (Gross Rent ÷ PITIA)	Purchase basis, rehab budget (LTC), ARV, and exit	Personal DTI and 2 years tax returns
Entity / LLC Vesting	Supported (LLC, LP, Corporation)	Supported for business-purpose assets	Generally individual borrower vesting

DSCR investing starts with the deal's cash flow.