A DSCR loan — debt service coverage ratio loan — is investment-property financing where the lender underwrites the property's income rather than your personal income. No tax returns, no W-2s, no employment verification in the traditional sense. The central question is simple: does the property's net operating income cover its mortgage payment, with margin?
The formula
DSCR equals net operating income divided by annual debt service. If a property produces $60,000 in NOI and the annual mortgage payment is $50,000, the DSCR is 1.20. Most investor lenders look for 1.20 to 1.25 or better at standard pricing, though programs exist below 1.0 — at a cost. A higher ratio typically earns better rates and terms, because the lender's risk is lower.
The catch is in how each side of the ratio is defined. Lenders vary on what counts as income (actual lease, market rent from an appraisal, or short-term-rental projections), what expenses they net out, and whether the debt service is principal-and-interest or interest-only. Two lenders can compute two different DSCRs on the same property. Always ask which definition is being used before comparing quotes.
What actually moves the ratio
- Purchase price. Every dollar of price is a dollar of loan. A lower price raises DSCR directly, which is why disciplined investors negotiate hard even on 'good' deals.
- Interest rate and loan structure. A point of rate on a $1M loan is roughly $700 a month of debt service. Interest-only periods raise the ratio mechanically but don't reduce principal risk.
- Verified rent. The appraisal's market-rent schedule often controls the income side. If the appraiser's rent figure comes in light, the deal can fail underwriting even when your own rent research says otherwise.
- Down payment. More down means less debt service, which raises the ratio — but it also means more capital trapped in one deal.
The levers you control at acquisition
Because DSCR is computed at the moment of purchase, the acquisition itself is where the ratio is won or lost. Price, terms, and credits all shape the loan you end up with. A closing-cost credit that reduces cash to close preserves capital you can deploy elsewhere — but how any credit interacts with a specific loan program is a lender question, and you should confirm the treatment with your loan officer before counting on it.
On a DSCR loan, you don't negotiate with the underwriter. You negotiate the inputs.Zeego investor principle
Where Zeego fits
Zeego's Deal Analyzer shows your DSCR live as you change price, rate, rent, and expenses — including the break-even rent and maximum offer price at a 1.25 ratio. When you're ready, a licensed Zeego agent negotiates the acquisition for a 0.75% fee and credits up to 1.75% of the purchase price back at closing, keeping more of your capital available for the next deal. We work alongside your DSCR lender; the financing is theirs, the acquisition is ours.