What Lenders Look for in a DSCR Loan: A Step-by-Step Guide
If you're thinking about using a DSCR loan to fund your next real estate deal, you’ve probably wondered: What exactly do lenders look for ? You’re not alone. DSCR loans are growing in popularity because they focus more on property income than your personal finances — but they’re still loans, and that means approval isn’t guaranteed. In this guide, we’ll walk you through the key steps lenders take when evaluating your DSCR loan application, and how you can position yourself for the best possible outcome. Understanding the DSCR Metric First, let’s break down the basics. DSCR stands for Debt Service Coverage Ratio. It tells the lender how well the property’s income covers its loan payments. Formula: DSCR = Net Operating Income (NOI) ÷ Annual Debt Obligation Most lenders want a DSCR of 1.2 or higher — meaning the property brings in 20% more than it needs to pay the loan. If your ratio is lower, lenders may see the deal as risky. That’s why having solid rental income is cr...
