For real estate investors focused on building passive income and long-term wealth, non-owner occupied properties—rental homes, multifamily units, and vacation rentals—are at the heart of a scalable investment strategy. But financing these properties can be challenging, especially when using traditional mortgage products that require personal income documentation, low debt-to-income ratios, and owner occupancy requirements.
That’s where DSCR loans come in. These cash-flow-based loans are designed specifically for non-owner occupied investment properties, offering flexibility, scalability, and fast approvals without relying on your personal income or tax returns.
In this guide, you’ll learn how DSCR loans work for non-owner occupied properties, who they’re best for, typical lender requirements, and how to use them to expand your real estate portfolio efficiently.
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A DSCR loan (Debt Service Coverage Ratio loan) is a type of non-QM (non-qualified mortgage) that allows real estate investors to qualify for financing based on the income generated by the property, not the borrower’s personal income.
DSCR = Net Operating Income (NOI) / Annual Debt Service
For example, if a rental property generates $60,000 in net operating income and the annual debt service (mortgage payments) is $48,000:
DSCR = $60,000 ÷ $48,000 = 1.25
Most lenders require a DSCR of 1.20 to 1.25 to approve the loan.
A non-owner occupied property is any real estate that the borrower does not use as their primary residence. These are 100% investment-focused assets that are rented to tenants for income.
Because the borrower doesn’t live in the property, these investments are treated as higher-risk by traditional lenders—but DSCR loans are built specifically for them.
Traditional mortgages require borrowers to qualify using W-2 income, tax returns, and strict debt-to-income ratios. For self-employed investors, LLC owners, or those growing large portfolios, these criteria can become barriers to growth.
DSCR loans eliminate those roadblocks by underwriting based on the property’s performance, not the borrower’s financials.
| Loan Feature | Typical Range |
|---|---|
| Minimum DSCR | 1.20 – 1.25 |
| Maximum Loan-to-Value (LTV) | Up to 80% (70–75% for cash-out refinances) |
| Credit Score Requirement | 660+ (700+ for best terms) |
| Loan Amount Range | $100,000 – $5,000,000+ |
| Term Options | 30-year fixed, 5/6 ARM, interest-only available |
| Prepayment Penalty | Yes (typically 3–5 year step-down or flat) |
| Ownership Type | LLC, LP, S-Corp, or individual |
| Reserve Requirements | 6–12 months of PITIA (principal, interest, taxes, insurance, and association dues) |
To qualify for a DSCR loan on a non-owner occupied property, you’ll need to demonstrate that the property can generate sufficient income to meet the lender’s DSCR threshold.
Some lenders may also require a rent roll and trailing 12-month income/expense statement, especially for multifamily properties.
Finance SFRs, duplexes, or small multifamily buildings rented to long-term tenants.
Use actual or market-based STR income to qualify for Airbnb and vacation rentals in legal jurisdictions.
Pull equity from non-owner occupied rentals to reinvest in additional properties or renovations.
Refinance a recently rehabbed property post-stabilization using its rental income to qualify.
Investor Profile: David owns three rental homes through an LLC and wants to buy a fourth—a duplex generating $3,000/month in rent. He has no W-2 income and writes off much of his self-employment earnings.
David qualifies for a DSCR loan with no income verification, and the property is financed through his LLC.
| Challenge | Solution |
|---|---|
| DSCR below lender minimum | Increase down payment or use interest-only loan option |
| STR income not recognized by lender | Use a lender that accepts Airbnb/Vrbo data or provide market rent comps |
| Property in an HOA with rental restrictions | Confirm short-term rental legality before applying |
| Low appraisal or high expenses | Provide comps and negotiate expenses to improve NOI |
DSCR loans are tailor-made for real estate investors acquiring non-owner occupied properties. With no income verification, no DTI limits, and flexible ownership structures, these loans remove many of the barriers that come with conventional financing.
Whether you’re purchasing your first rental property or scaling to your tenth, DSCR financing provides a streamlined, investor-friendly solution to keep growing your portfolio based on what really matters: cash flow.
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