DSCR Loans for STR Investors: 2026 Rates and Requirements
DSCR ratio = Property gross rent / Loan PITI | Required DSCR: 1.0-1.25x typical (some lenders accept 0.75x for stronger borrowers) | 20-25% down payment | Rates: 7.5-8.5% as of late 2025/early 2026 | No income/employment verification — qualifies on property cash flow
DSCR (Debt Service Coverage Ratio) loans are the dominant financing pathway for non-owner-occupied investment STRs in 2026. The structure: lenders qualify the loan based on the property's expected rental income covering the mortgage payment, rather than the borrower's W-2 income or DTI. This makes DSCR loans accessible to self-employed investors, retirees, and high-net-worth borrowers whose tax-return income doesn't reflect their true financial capacity. The trade-off: rates run 0.75-1.5% above conventional 30-year fixed, and down payment requirements are higher (20-25% vs 5-20% on conventional).
How DSCR is calculated for STR
DSCR = (Annual gross rent) / (Annual PITI: Principal + Interest + Taxes + Insurance + HOA). For STR-specific lending, lenders use either: (1) market-rent appraisal estimating long-term rental value, or (2) actual STR income if the property has 12+ months of operating history. Most STR-friendly DSCR lenders prefer option 1 for new acquisitions and accept option 2 for refinances of seasoned properties. A 1.0 DSCR means rent exactly covers PITI; 1.25x means a 25% buffer.
Rate ranges and lender shopping
Rate quotes vary 0.5-1% across lenders for the same borrower profile. Shop at least 3-5 DSCR lenders. The major STR-friendly DSCR programs in 2026: Visio Lending, Kiavi (formerly LendingHome), Easy Street Capital, A&D Mortgage, LendingOne, RCN Capital, Velocity Mortgage Capital. Brokers specializing in DSCR (Indie Mortgage, Truss Financial Group) can price-shop multiple lenders simultaneously.
| DSCR Tier | Typical Rate | LTV | Notes |
|---|---|---|---|
| DSCR 1.25+ | 7.50-7.85% | 75-80% | Best rates; most lenders compete |
| DSCR 1.0-1.24 | 7.85-8.25% | 70-75% | Mid-tier pricing |
| DSCR 0.75-0.99 | 8.25-8.75% | 65-70% | Higher rate, fewer lenders |
| No-DSCR / cash-flow lenders | 8.50-9.50% | 60-70% | Specialty programs |
What lenders look for beyond DSCR
- Borrower credit score: 680+ for best rates, 660+ acceptable, sub-660 increasingly limited.
- Liquid reserves: 3-6 months of PITI required post-closing.
- Real estate experience: first-time STR buyers face slightly tighter terms or rate adds.
- Property condition: appraised condition C3 or better; deferred-maintenance properties may require repairs at closing.
- Vesting: most DSCR lenders allow LLC or natural-person vesting; verify before closing.
Cost-segregation interaction
DSCR underwriting uses gross rents (not net rental income), so cost-segregation deductions don't reduce your DSCR ratio for qualification purposes. This is a meaningful structural benefit — operators can take aggressive year-one cost-seg deductions to reduce taxable income without impairing future financing capacity. The cost-seg federal tax shelter and DSCR financing are complementary, not conflicting. See cost segregation for Airbnb properties for the tax-strategy side.
Frequently asked questions
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