DSCR Loan Requirements 2026: What Investors Need to Know

DSCR loans exist because rental property investors often have complex personal tax returns that understate their actual cash flow. A borrower who owns eight properties, takes depreciation, uses pass-through entities, and reinvests income may show very little on paper. DSCR underwriting bypasses personal income entirely and looks at one question: does the property generate enough rent to cover its own debt service?

How DSCR Is Calculated

The calculation is gross monthly rent divided by PITIA. PITIA is principal, interest, taxes, insurance, and HOA if applicable. A DSCR of 1.0 means the rent exactly covers the payment. A DSCR of 1.25 means the property generates 25% more rent than the payment. Most lenders require a minimum DSCR of 1.0. Some lenders will go to 0.75 with a larger equity position or lower LTV requirement.

How Rent Is Documented

• ✦Existing lease: use the executed lease amount as the qualifying rent
• ✦Vacant property: use a market rent appraisal (Form 1007) from the appraiser
• ✦Short-term rental: most lenders require AirDNA market data; Acra Lending accepts documented STR history
• ✦Mixed-use: commercial portion of rent typically not used by residential DSCR lenders

LTV and Credit Requirements in 2026

Maximum LTV for a 1-unit DSCR purchase is typically 80% at most lenders, meaning 20% down minimum. Two-to-four unit properties generally cap at 75% LTV. Cash-out refinances are available but typically max at 75% LTV. FICO requirements start at 620 at lenders like Acra and A&D Mortgage. Better pricing is available at 680 and above. Loan amounts up to $3 million are available at multiple lenders; some go higher.

LLC and Entity Vesting

Most DSCR lenders allow title to be held in an LLC or entity. This is a significant feature for investors who operate through legal entities for liability protection. The borrower typically still signs a personal guarantee. Verify entity requirements with each lender, as documentation (operating agreement, articles of organization) will be required.

Common DSCR Scenarios That Get Declined

• ✦Owner-occupied or second home: DSCR is investment property only
• ✦DSCR below 0.75 without compensating equity: most lenders have a hard floor
• ✦Short-term rental income with no track record and lender that requires it
• ✦1031 exchange timeline pressure with a lender that has slow processing
• ✦Rural properties: some lenders restrict DSCR to specific property types and MSA sizes