A Debt Service Coverage Ratio (DSCR) loan is a type of non-qualified mortgage (non-QM) primarily used by real estate investors to finance investment properties, such as rental properties. Unlike traditional mortgage loans that focus on the borrower’s personal income, credit score, or employment history, a DSCR loan evaluates the property’s ability to generate income to cover the mortgage payments. The lender assesses the property’s cash flow through its Debt Service Coverage Ratio, which compares the property’s net operating income (NOI) to its debt obligations.
