DSCR loans explained: how to buy STR properties without W-2 income verification

Category: Multi-Property & Scaling

By: Tony Russo

Posted: 2026-02-17T11:38:10.196Z

I keep hearing about DSCR loans as the go-to financing for STR investors. But I don't fully understand how they work. Can someone explain: What is DSCR? How do lenders calculate it for Airbnb income? What credit score, down payment, and reserves do I need? And which lenders actually offer good DSCR loan terms for STR? Currently have 1 property (financed conventionally) and want to scale to 3-4 without hitting DTI limits.

Reply by Emily Chen:

DSCR loans are how serious STR investors scale past the point where conventional mortgages run out. I'll explain it as simply as I can. DSCR stands for Debt Service Coverage Ratio. It's basically: does the property's income cover the mortgage payment? You calculate it by dividing the property's annual rental income by the annual debt payments. If it comes out to 1.0 that means income exactly covers the mortgage. Lenders typically want 1.0 to 1.25 minimum. How they figure out income for STR: if you have 12+ months of Airbnb history on that property (or a similar one), they'll use your actual earnings. For a new purchase they'll rely on AirDNA projections or an appraiser's rental analysis. Some lenders haircut the projections to 75% to be safe. They look at gross rental income, not net — how you manage expenses is your problem. Quick example with real numbers: say you're buying a $350K property, putting 25% down ($87,500), so $262,500 loan. Monthly payment all-in (principal, interest, taxes, insurance) comes to about $2,100, so $25,200/year. If the property projects $42,000/year in rental income, your DSCR is 1.67 — well above minimum and you'd get approved easily. What you'll need to qualify: credit score 660-720 minimum depending on lender, 20-25% down payment, 6-12 months of mortgage payments in cash reserves. Rates right now (2026) are running 7-9% which is higher than conventional, and most come with a 30-year term. Watch out for prepayment penalties — most DSCR loans lock you in for 3-5 years. Lenders I've had good experiences with or heard consistently positive things about: Kiavi (https://kiavi.com) for fast closings and a smooth online process, Lima One Capital for competitive rates on STR, Easy Street Capital if it's your first DSCR loan, and Visio Lending for larger loan amounts. The massive advantage: DSCR loans don't count against your personal debt-to-income ratio. So you can stack property after property without your W-2 income being the bottleneck. I have 4 DSCR loans and on paper it looks like I have zero investment debt. That's the whole point — scaling beyond what conventional financing allows. The tradeoff is real though: higher rates (1-2% above conventional) and bigger down payments. But if you're buying cash-flowing STR properties, the math still works out overwhelmingly in your favor.