DSCR Loan for My $675K Rental Property: I Qualified With Zero Personal Income Verification

I’ve been a real estate investor for 6 years, owning four single-family rental properties in Phoenix metro area. I’m also self-employed running a consulting business, which makes my tax returns look terrible for traditional mortgage qualification.

My 2023 tax return showed:

• Gross business revenue: $145,000
• Net taxable income after deductions: $38,000
• Rental income reported: $42,000
• Rental expenses reported: $38,500
• Net rental income on tax returns: $3,500

So on paper, I earn $38,000 + $3,500 = $41,500/year ($3,458/month).

When I found a perfect 3BR rental property listed at $675,000 in Gilbert, AZ that would rent for $2,950/month, I knew the numbers worked for an investment—but I also knew conventional lenders would reject me based on my low tax return income.

PITI payment on $675K home: About $4,500/month

My tax return income: $3,458/month

No lender would approve me.

Then I learned about DSCR loans—investment property mortgages that qualify you based on the property’s rental income alone, with zero verification of your personal income.

Here’s exactly how I purchased a $675,000 investment property using DSCR loan without providing W-2s, tax returns, or any documentation of my personal income.

Understanding DSCR Loans (Debt Service Coverage Ratio)

What Are DSCR Loans?

DSCR loans are non-QM investment property mortgages that qualify borrowers based solely on the rental property’s income—not the borrower’s personal income.

“DSCR” stands for Debt Service Coverage Ratio:

DSCR = Monthly Rental Income ÷ Monthly PITI Payment

Examples:

• Rent: $2,500 / PITI: $2,000 = 1.25 DSCR (rental income covers 125% of payment)
• Rent: $2,000 / PITI: $2,000 = 1.0 DSCR (rental income exactly covers payment)
• Rent: $1,800 / PITI: $2,000 = 0.90 DSCR (rental income covers only 90% of payment)

Lenders’ DSCR requirements:

• 1.0+ DSCR: Best rates (rental income fully covers payment)
• 0.90-0.99 DSCR: Acceptable with higher rates (you subsidize $100-200/month)
• Under 0.75 DSCR: Usually won’t qualify (too much negative cash flow)

The key advantage: Lender never verifies your personal income, employment, or tax returns—only the property’s rental income.

Who Benefits From DSCR Loans?

Ideal candidates:

• Self-employed investors with low taxable income on returns
• Business owners who maximize deductions
• W-2 employees maxed on DTI (already own 4+ mortgages)
• Foreign nationals investing in U.S. real estate
• Retirees with rental income but limited personal income
• Anyone who can’t document income traditionally

Not ideal for:

• First-time rental property buyers (many lenders require 1+ existing rental)
• Borrowers with credit under 640
• Properties that don’t cash flow (DSCR under 0.75)
• Anyone who can qualify conventionally (conventional rates are better)

My DSCR Loan Application for $675K Investment Property

The Property

Purchase price: $675,000

Location: Gilbert, AZ (Phoenix metro—strong rental market)

Property type: Single-family, 3BR/2BA, 1,850 sq ft, built 2018

Market rent: $2,950/month (verified by appraiser and local rent comps)

DSCR calculation:

• Monthly rent: $2,950
• Estimated PITI: $4,520 (more on this below)
• Preliminary DSCR: $2,950 ÷ $4,520 = 0.65 DSCR

Problem: 0.65 DSCR was too low—lenders want 0.75+ minimum, ideally 1.0+.

Improving My DSCR by Increasing Down Payment

To improve DSCR, I had three options:

Option 1: Find higher-rent property (but this was the best deal I’d seen in months)

Option 2: Negotiate lower purchase price (seller wouldn’t budge—already priced fairly)

Option 3: Put more down payment to reduce loan amount and PITI

I chose Option 3.

Original scenario (20% down):

• Purchase price: $675,000
• Down payment: $135,000 (20%)
• Loan amount: $540,000
• Monthly P&I: $3,780 (at 7.50% DSCR rate)
• Property taxes: $560/month
• Insurance: $180/month
• PITI: $4,520
• DSCR: $2,950 ÷ $4,520 = 0.65 (too low)

Revised scenario (30% down to improve DSCR):

• Purchase price: $675,000
• Down payment: $202,500 (30%)
• Loan amount: $472,500
• Monthly P&I: $3,308 (at 7.50%)
• Property taxes: $560/month
• Insurance: $180/month
• PITI: $4,048
• DSCR: $2,950 ÷ $4,048 = 0.73 (still barely too low)

Final scenario (35% down):

• Purchase price: $675,000
• Down payment: $236,250 (35%)
• Loan amount: $438,750
• Monthly P&I: $3,072 (at 7.50%)
• Property taxes: $560/month
• Insurance: $180/month
• PITI: $3,812
• DSCR: $2,950 ÷ $3,812 = 0.77 DSCR (acceptable)

I qualified with 35% down payment producing 0.77 DSCR.

DSCR Loan Terms

Final loan details:

• Purchase price: $675,000
• Down payment (35%): $236,250
• Loan amount: $438,750
• Interest rate: 7.50% (DSCR loan premium vs. conventional 7.00%)
• Loan term: 30 years fixed
• Monthly P&I: $3,072
• Property taxes: $560/month
• Insurance: $180/month
• Total PITI: $3,812/month

Monthly cash flow:

• Rental income: $2,950
• PITI payment: $3,812
• Monthly cash flow: -$862 (negative cash flow)

Wait, negative cash flow? Why did I buy this?

Good question. Here’s my reasoning:

Why Negative Cash Flow Made Sense

1. Property appreciation

Phoenix rental properties appreciated 8-12% annually in recent years. Even at conservative 6% annual appreciation, $675,000 property grows by $40,500/year.

Annual costs:

• Negative cash flow: $862 × 12 = $10,344
• Appreciation: $40,500
• Net gain: $30,156/year

2. Principal paydown

Each month, $1,400 of my $3,072 payment goes toward principal (early years of mortgage).

Annual principal paydown: $1,400 × 12 = $16,800

This is forced savings building equity.

3. Tax benefits

Rental property expenses are deductible:

• Mortgage interest: $32,850/year (Year 1)
• Property taxes: $6,720
• Insurance: $2,160
• Repairs/maintenance: $3,000
• Depreciation: $24,545 (27.5 year schedule on $675K)
• Total deductions: $69,275

My marginal tax rate is 35%, so deductions save me $24,246 in taxes.

True annual cost after tax savings: $10,344 negative cash flow - $24,246 tax savings = +$13,902 positive after-tax benefit.

4. Rent growth

Phoenix rents growing 4-6% annually. In 3 years, rent likely increases to $3,300-$3,500/month—eliminating negative cash flow.

Bottom line: Property costs me $862/month out-of-pocket but generates $40,500 appreciation + $16,800 principal paydown + $24,246 tax savings = $81,546 annual benefit vs. $10,344 cost.

ROI on my $236,250 down payment: ($81,546 - $10,344) ÷ $236,250 = 30% annual return.

Documentation Required

What lenders asked for:

✅ Property documentation:

• Purchase contract
• Appraisal (ordered by lender)
• Rent schedule or lease agreement (showing $2,950/month market rent)
• Property insurance quote

✅ Financial documentation:

• Proof of down payment funds (bank statements showing $236,250+ available)
• 6 months reserves (additional $23,000 liquid after down payment)
• Credit report (my score: 698)

❌ What lenders did NOT ask for:

• W-2s or pay stubs
• Tax returns
• Proof of employment
• Personal income documentation
• Other rental property financials (didn’t care about my existing 4 rentals)

That’s the beauty of DSCR loans—zero personal income verification.

Qualification Requirements

DSCR loan requirements vary by lender, but typical minimums:

Credit score: 660+ (640+ with some lenders at higher rates)

• 660-679: Higher rates (7.75-8.25%)
• 680-699: Standard rates (7.50-7.75%)
• 700-719: Better rates (7.25-7.50%)
• 720+: Best rates (7.00-7.25%)

Down payment: 20-30% depending on DSCR

• 1.0+ DSCR: 20% down
• 0.90-0.99 DSCR: 25% down
• 0.75-0.89 DSCR: 30-35% down

Reserves: 6-12 months PITI (varies by lender and number of properties)

Property type: Most lenders accept SFH, condos, 2-4 units (some exclude condos)

Experience: Many lenders require existing rental property ownership (first-time investors may not qualify)

My qualifications:

• Credit score: 698
• Down payment: 35% ($236,250)
• DSCR: 0.77
• Reserves: $23,000 (6 months PITI)
• Experience: 4 existing rental properties

I qualified comfortably.

DSCR vs. Conventional Investment Property Loan

If I’d Applied Conventionally

Conventional investment property loan requirements:

• 15-25% down payment
• Verify personal income via W-2 or tax returns
• DTI under 45% (including all existing mortgages)
• Credit score 640+ (680+ for best rates)

My DTI calculation (conventional):

Monthly income (from tax returns): $3,458

Monthly obligations:

• Four existing rental PITIs: $7,200 (lender counts full PITI even though tenants pay)
• Personal residence: $2,100
• Car payment: $485
• New property PITI: $3,812
• Total obligations: $13,597

DTI: $13,597 ÷ $3,458 = 393% DTI

I’d be rejected instantly.

Even if lender counted 75% of my rental income as offset (conventional approach), I’d still have 120% DTI—way over 45% max.

DSCR loan didn’t care about my DTI or existing properties—only the subject property’s rental income.

Cost Comparison

DSCR loan (what I got):

• Rate: 7.50%
• Down payment: 35%
• Monthly P&I: $3,072

Conventional (if I qualified):

• Rate: 7.00%
• Down payment: 20%
• Monthly P&I: $3,594 (larger loan at lower rate)

Monthly payment comparison:

• Conventional: $3,594 (on $540K loan)
• DSCR: $3,072 (on $438,750 loan)
• DSCR payment is $522/month LOWER due to smaller loan amount

But DSCR required $101,250 more down payment (35% vs. 20%).

Rate premium: 7.50% vs. 7.00% = 0.50% (DSCR penalty)

On $438,750 loan, 0.50% premium = $183/month extra interest.

Over 5 years, DSCR costs: $183 × 60 = $10,980 extra in interest

But: I couldn’t qualify conventionally anyway, so this comparison is theoretical.

Current Status (12 Months Later)

Home value today: $730,000 (8.1% appreciation in 12 months)

Loan balance: $422,000 (paid down $16,750)

Current equity: $308,000 (from $236,250 initial investment)

Equity gain: $71,750 in 12 months (30% return on down payment)

Rent: Still $2,950/month (lease renews in 3 months—raising to $3,200)

Monthly cash flow:

• Current: -$862/month
• After rent increase to $3,200: -$612/month

Annual cash flow: Still negative, but improving

Tax benefits: Saved $24,000+ in taxes (deductions + depreciation)

Total 12-month return:

• Appreciation: $55,000
• Principal paydown: $16,750
• Tax savings: $24,000
• Less negative cash flow: -$10,344
• Net gain: $85,406

ROI: $85,406 ÷ $236,250 = 36% annual return on my down payment

This is why I invest in real estate—even with negative cash flow.

When to Use DSCR Loans

Ideal Scenarios for DSCR Financing

✅ You’re self-employed with low taxable income (high write-offs)
✅ You own multiple investment properties (maxed out on conventional DTI)
✅ You’re a foreign national investing in U.S. real estate
✅ Property cash flows well (1.0+ DSCR for best rates)
✅ You have 20-30% down payment and 6-12 months reserves
✅ You prioritize speed (DSCR closes faster without income verification)

When Conventional Makes More Sense

✅ Your DTI can support another conventional loan (under 45%)
✅ You have strong documented income (W-2 or clean tax returns)
✅ You want better rates (conventional 0.50-0.75% lower than DSCR)
✅ You want lower down payment (15-20% vs. 25-35%)
✅ This is your first rental property (some DSCR lenders require experience)

Tips for Maximizing DSCR Approval

1. Optimize Your DSCR Ratio

Target 1.0+ DSCR if possible:

• Find properties with strong rent-to-price ratios
• Increase down payment to reduce PITI
• Consider house hacking (rent extra bedrooms to boost income)
• Use market rent (appraiser determines) not actual lease rent if market is higher

2. Improve Your Credit Score

Every 20-point improvement saves 0.125-0.25% on rate.

720+ credit gets you within 0.25% of conventional rates.

Check your credit score before applying—small improvements yield big savings on DSCR loans.

3. Build Strong Reserves

Most lenders want 6-12 months PITI in reserves after closing.

If you own multiple properties, they may want 3-6 months reserves PER PROPERTY.

Plan accordingly—don’t drain all savings for down payment.

4. Find Properties With Strong Rental Income

Look for properties where:

• Market rent is 1.0-1.2% of purchase price monthly ($3,000 rent on $300K property = 1.0%)
• Rents are rising 4-6% annually in the market
• Property is in good condition (minimizes maintenance cutting into cash flow)
• Local employment is strong (tenant demand stays high)

5. Work With Experienced DSCR Lenders

Not all lenders offer DSCR loans.

I found my lender through Browse Lenders connecting with portfolio lenders specializing in investment property financing.

Ask specifically about:

• DSCR ratio requirements (some accept 0.75, others require 1.0+)
• Down payment requirements at different DSCR levels
• Whether they count market rent or actual lease rent
• Credit score and reserve requirements
• Experience requirements (first-time investor vs. existing portfolio)

The Bottom Line

I purchased a $675,000 investment property with $236,250 down (35%) using DSCR loan at 7.50% rate—without providing any personal income documentation.

12 months later:

• Property worth $730,000 (8.1% appreciation)
• Equity: $308,000 (30% gain on down payment)
• Tax savings: $24,000
• Cash flow: -$862/month (but improving with rent increases)
• Total return: 36% annual ROI

Could not have qualified conventionally due to 393% DTI from existing properties and low tax return income.

My advice for real estate investors:

Use DSCR Loans If:

✅ You can’t qualify conventionally (high DTI, low documented income)
✅ Property’s DSCR is 0.75+ (ideally 1.0+)
✅ You have 25-35% down payment and strong reserves
✅ You prioritize building portfolio over monthly cash flow
✅ You understand tax benefits offset negative cash flow

Use Conventional If:

✅ You can qualify (DTI under 45%, strong documented income)
✅ You want better rates (conventional 0.50-0.75% lower)
✅ You want lower down payment (15-20%)
✅ Property is your first rental (some DSCR lenders require experience)

Connect with DSCR specialists who understand investment property financing and can calculate your optimal loan structure.

For investors with strong portfolios but maxed-out DTI, DSCR loans are a game-changer—allowing infinite scalability based on property performance, not personal income.

I now own 5 rental properties generating $940,000 in total equity—and I couldn’t have done it without DSCR financing unlocking properties 4 and 5.