DSCR loans: what underwriters actually check

A DSCR loan is underwritten against the property's income, not yours — which is why it is the natural financing step at Year 3, when your W-2 stops being able to carry the next door.

The number

DSCR = net operating income ÷ annual debt service. Below 1.20, most lenders stop reading. At 1.30 at 80% occupancy — not your current occupancy, and not the rent you plan to charge after renovations — you have a deal a lender will compete for.

Run your own numbers in the deal analyzer before a lender does it for you.

What they look at, in order

1. The appraisal's rent schedule — not your rent roll.
2. Actual taxes and insurance — quoted, not estimated.
3. The coverage ratio at their stress rate, not your note rate.
4. Reserves — months of debt service you hold after closing.
5. Your credit — as a gate, not a rate.
6. The entity — clean LLC, clean operating agreement.

Nothing on that list is your salary. That is the point, and it is also the warning: the property has to stand alone, because the lender is making sure it can.

The warning, taken seriously

Read the six checks again as a risk document, because that's what they are. The lender is pricing the scenario where you are irrelevant — rents at the appraiser's number, occupancy stressed, taxes as quoted — and any deal that only works above those assumptions is a deal that only works when nothing goes wrong. Borrowers who treat DSCR's no-income-docs convenience as permission to stack marginal doors are re-running a very old movie: property-qualified lending scaled the fastest in the mid-2000s, and the 1.05-coverage portfolios it built were the first to fall when rents wobbled. The honest use of the product is the opposite: let the lender's stress test be your stress test, keep the reserves they require after closing as a personal covenant, and remember the prepayment penalty means this is hold-the-asset money — which, on this site's clock, is exactly what you wanted anyway.