What is a DSCR loan?

Where the market sits in September 2026. There is no published minimum ratio, and the lenders do not agree on one. Six DSCR product pages read on 21 September 2026: Easy Street Capital and Griffin Funding state no minimum DSCR at all, CoreVest states 0.80, Defy Mortgage publishes options down to 0.75, and Lima One Capital states 1.00 with 1.20 for its best pricing. Kiavi publishes no figure. The 1.25 repeated across the internet as the requirement is above every number those lenders print.

BEDRWay is not a lender. This page explains how the product is underwritten across the market, so the terms are familiar before the first conversation. For an answer on a specific property, a licensed loan officer is the person who can give it.

The formula, and the one letter people leave out

DSCR = gross monthly rent ÷ PITIA

The A is association dues. On a condominium or in a mandatory homeowners association it is often the difference between clearing a threshold and missing it, and it is the component most often forgotten when an investor works the ratio out in advance.

Note what the formula does not contain: vacancy, management, maintenance and capital expenditure are all absent. Almost every lender that publishes a formula uses gross rent. The lender's ratio is therefore more generous than an investor's own analysis of the same building. The lender's number decides whether the loan happens. The investor's number decides whether the property is a good idea. Work yours out on the DSCR calculator, which shows the break-even rent as well as the ratio.

Why no one asks for your income, and it is not a loophole

Every competing explanation of this product stops at the arithmetic. The reason the arithmetic is allowed to stand in for an income test is a legal one, and it is short.

The ability-to-repay rule, at 12 CFR 1026.43(a), applies to "any consumer credit transaction that is secured by a dwelling" (eCFR, read 21 September 2026). A DSCR loan is not one. Regulation Z exempts "an extension of credit primarily for a business, commercial or agricultural purpose" at 12 CFR 1026.3(a)(1), and the official commentary removes any argument about which side of the line a rental falls on. Comment 3(a)-4 states that credit extended to acquire, improve or maintain rental property that is not owner-occupied "is deemed to be for business purposes", regardless of the number of housing units (eCFR, Supplement I to Part 1026, read 21 September 2026).

So a DSCR loan is not a consumer mortgage with the income check removed. It is a different category of credit that the consumer rule never reached. That is also why the loan looks unfamiliar in other ways: different disclosures, and terms such as prepayment penalties that would be unusual on a home loan. The full consequence for documentation is on the no income verification page.

The 14 day line

The same commentary sets a bright line on occupancy: if the owner expects to occupy the property for more than 14 days in the coming year, it cannot be treated as non-owner-occupied and the business purpose rule does not apply. A beach house used for a month each summer is the commentary's own example. If the plan involves living there at any point, say so at the start.

What counts as a good ratio

There is no official answer, and this is worth stating plainly because the internet repeats 1.25 as though somebody published it. No federal agency sets a minimum DSCR, a maximum loan-to-value or any other underwriting standard for these loans. The only federal texts that use the term at all govern something else: the Federal Housing Finance Agency's multifamily examination guidance, and the interagency real estate lending guidelines at 12 CFR Part 34, Appendix A to Subpart D, which require a bank to have a debt service coverage standard without setting a number.

What exists instead is a market, and every published ladder has the same shape:

• 1.25 and above. The best pricing tier. Worth aiming at rather than 1.00, because the gap between them shows up in cost rather than in a decline.
• 1.00 to 1.24. The standard band. The property covers itself.
• 0.75 to 0.99. The property does not quite cover itself. A meaningful number of lenders still work here, with a lower maximum loan-to-value, more reserves and a pricing premium.
• Below 0.75. Usually outside the box on a standard program, and the route is a no-ratio structure instead.

The bands describe a market, not a rule, and the September 2026 readings at the top of this page show how far the market sits from the folklore. Griffin Funding goes further and publishes a distribution: in July 2026 alone it closed loans with coverage ratios from 0.70 to 2.23, including two below 1.00 (Griffin Funding, page stamped August 2026, read 21 September 2026). Sub-1.00 lending is live rather than theoretical, and a thin ratio is a pricing and structure conversation rather than an automatic no.

Where the rent number comes from

The numerator is not simply what the owner says the unit earns. On a tenanted property the lender has two figures, the rent on the executed lease and the appraiser's opinion of market rent, and commonly underwrites the lower of the two. A below-market lease inherited from a seller therefore caps the ratio even where the appraiser agrees the unit would let for more. On a vacant property the appraiser's market rent is normally all there is.

Who the product is built for

• Self-employed investors. The group it fits best. A business owner whose returns are optimised for tax rather than for a mortgage application often cannot document the income a conventional loan wants while owning perfectly sound property.
• Investors past the agency limit. There is no debt-to-income test, so most DSCR programs impose no cap on the number of financed properties. Agency financing is bounded twice over, by a cap on financed properties and by the baseline conforming loan limit, which the Federal Housing Finance Agency revises every November for the following January. Both ceilings, with the current figures, are on the DSCR loans hub, which is where those numbers are maintained.
• Buyers closing in an entity. Vesting title in an LLC is normal here rather than exceptional.

It is a worse deal than agency financing for an investor with strong documented income buying a first or second rental. The down payment is larger, the pricing is higher because the lender takes property risk without an income backstop, and prepayment penalties are the norm. The comparison is worked through on DSCR versus a conventional investment loan.

Sources

• Electronic Code of Federal Regulations, 12 CFR 1026.3, Exempt transactions, paragraph (a)(1), read 21 September 2026.
• Electronic Code of Federal Regulations, 12 CFR 1026.43, Minimum standards for transactions secured by a dwelling, paragraph (a), scope, read 21 September 2026.
• Consumer Financial Protection Bureau, Regulation Z official interpretations, comment 3(a)-4, non-owner-occupied rental property, read 21 September 2026.
• Lender product pages, each read 21 September 2026 and attributed above by name: Easy Street Capital, Griffin Funding, CoreVest, Defy Mortgage, Lima One Capital and Kiavi. Each figure is that lender's own published claim rather than a verified underwriting outcome, and none of them is a BEDRWay partner quote.
• Office of the Comptroller of the Currency, 12 CFR Part 34, Appendix A to Subpart D, interagency guidelines for real estate lending policies, read 21 September 2026. It requires a lending policy to set a debt service coverage standard. It sets no figure, and it does not reach a one to four unit investor loan.

Keep reading

• DSCR loan down payment requirements What lenders actually publish, and why zero down is not a program.
• DSCR versus conventional Two loans on the same house, and the two different things measured.
• No income verification, explained What is skipped, what is still checked, and the rule behind it.
• The full DSCR guide Property types, reserves, prepayment penalties, short-term rentals.