A debt-service coverage ratio (DSCR) loan asks a different question than a conventional mortgage does. Instead of verifying your personal income with tax returns and W-2s, the lender looks at the subject property itself: does the market rent cover the proposed mortgage payment?

The ratio is simple — gross monthly rent divided by the proposed principal, interest, taxes, insurance, and HOA (PITIA). A ratio of 1.0 means rent exactly covers the payment; most programs want to see 1.0–1.25 or better, though some will go lower with a rate adjustment or larger down payment.

Because there’s no personal income underwrite, DSCR loans move faster for self-employed investors and those building a rental portfolio where tax-return income doesn’t reflect actual cash flow. The trade-off is typically a larger down payment (often 20–25%), a slightly higher rate than an owner-occupied conventional loan, and reserve requirements — usually several months of the new payment held in the bank at closing.

DSCR loans close in an LLC’s name as often as an individual’s, which makes them a common tool for investors scaling a portfolio without each purchase touching their personal debt-to-income ratio.