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DSCR Loans Illinois Understanding Your Options
10 minute read
November 27, 2022

It's easy to see why many real estate investors are interested in DSCR loans for Illinois. The home state of Chicago, the third-largest metropolis in the U.S., is full of activities and sights for families.

Art, fine dining, and eight major league sports teams attract visitors and newcomers worldwide. And for business, O'Hare International Airport connects to over 200 destinations around the country and the world.

A DSCR loan could help you break into this exciting real estate market since approvals are based on the property’s cash flow, not your personal income.

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What’s in this article?

How does a DSCR loan work?
How is DSCR calculated?
Minimum DSCR to qualify
DSCR mortgage rates
The 5 best areas to invest in Illinois
5 tips for Illinois investors
Start your DSCR loan

Why get a DSCR loan in Illinois?

For many investors, DSCR loans are the preferred financial product for purchasing an investment property in Illinois.

The state offers a wide range of home prices and rents, from luxury multi-million dollar residences to affordable homes for which a buyer could almost pay cash.

Home prices were up 0.6% over last year, selling at a median price of $253,500, which is significantly lower than the national median of $454,900.

How does a DSCR loan work?

When you apply for a DSCR loan, your personal finances are not scrutinized as part of the application process.

Instead, by showing the projected rent(s) versus the proposed payments, a lender can see if your investment property is viable.

This comparison is why this loan is called a debt service coverage ratio (DSCR) program.

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How is DSCR calculated?

Lenders use this ratio to evaluate whether a proposed investment property can generate enough rental income to pay mortgage payments.

The comparison (or ratio) results are expressed as decimals, such as 1.30 or 1.30x.

Calculating DSCR is relatively straightforward.

For residential properties—take the property's monthly rental income and divide it by the estimated mortgage payment.

For commercial properties—lenders will look at the net operating income (or NOI) and compare that to the estimated payment.

He's the equation you use to calculate DSCR:

DSCR = Income / Payment

If your DSCR ratio comes up at 1.0 or 1.0x, your investment can break even at that time. If your ratio comes up at 1.25 or 1.25x, your property can generate 25% more income than its payment requires.

For most lenders, a DSCR of 1.25 or 1.25x is the minimum requirement for approval.

DSCR income

How do you determine residential property income for the above calculation?

Regarding residential properties, DSCR income is the sum of all rents charged for units in the building. For commercial investment properties, you must use NOI.

DSCR payment

How do you determine what a full payment is for the above calculation?

"Payment," in the above calculation, refers to the sum of all the components of a monthly mortgage payment, often referred to as PITIA.

The acronym PITIA stands for the principal (the required loan balance being paid down each month), interest (a percentage of the principal), taxes, insurance, and associated fees (like HOA fees or other mandatory dues).

Example: How higher rent(s) might improve DSCR

$1,500$1,6000.94 or 0.94x
$1,900$1,6001.19 or 1.19x

Example: How lower payment can improve DSCR

$1,500$1,6000.94 or 0.94x
$1,500$1,2001.25 or 1.25x

Pro Tip: You can see how negotiating more affordable payments for your loan can improve DSCR. Also, charging more rental income can tip your investment property into more profitable territory.

What is the minimum DSCR to qualify in Illinois?

The requirements for DSCR will vary from lender to lender. While most Illinois mortgage companies will only consider a DSCR of 1.25 (1.25x) or above, a few lenders might allow a DSCR below that.

Some lenders might go as low as 1.0, or perhaps 0.75. Additionally, some rare lenders have no minimum requirements for DSCR.

However, a higher DSCR will generally mean you can negotiate more favorable terms for your mortgage.

DSCR Loan guidelines and fast facts. All about Debt Service Coverage Ratio loans.

How to qualify for a DSCR loan in Illinois

On average, the application process for DSCR loans takes less time than if you were to apply for any standard investment mortgages.

This time savings is because the lender does not need to go over your personal income documentation such as complex tax returns, P&Ls, etc.

Instead, approval for DSCR is based almost solely on the income generated by the property, streamlining the process considerably.

Is it difficult to qualify for a DSCR loan?

When applying for a mortgage, many investors find DSCR loans to be more borrower-friendly than traditional processes. In addition, borrowers may find they can qualify for a DSCR loan easier without income verification.

Less documentation to be verified means a streamlined process that makes a DSCR loan application more manageable for everyone.

Common DSCR qualifications for Illinois lenders include the following factors:

Loan-to-value (LTV): For most DSCR loans, the maximum LTV ratio is 80% (the 20% difference is the DSCR loan down payment).

Credit score: 640

Verifying the property's future rental income: The appraiser will complete a Fannie Mae form 1007 which is a professional rental income estimate.

Loan purpose: Purchase, refinance and cash out.

Property types allowed: Typically, single-family residences, 2–4-unit properties, townhomes, condo hotels, and standard and non-warrantable condos, 5+ unit apartment buildings and other commercial structures.

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Property use: DSCR loans are not used for primary residences—investment/rental scenarios only, short-term or long-term.

Loan type: Several different loan terms such as 30-year fixed, 5-year ARMs, 40-year terms with 10-year interest only, etc.

Income and employment, debt-to-income ratio: No DTI calculation is needed. Personal forms of income are not taken into consideration unless the property’s income does not cover the payment.

Maximum loan amount: Most DSCR mortgage lenders have a maximum between $1-5 million.

Maximum properties owned: No maximum for the number of properties you can own.

Prepayment penalties: Lenders will often charge a prepayment penalty if you repay the loan or sell the property too early. Check the loan agreement and ask your lender about penalties. 

Cash Reserves: Having 6-12 months' worth of PITI payments in reserve might be required.

Closing in the name of an LLC: Most DSCR lenders can allow this.

Seller-paid closing costs: Some sellers may offer to contribute to the closing costs. While many lenders are agreeable to this, they may set certain limits on the terms.

Submit your DSCR loan scenario.

DSCR mortgage rates Illinois

DSCR mortgage rates can be higher compared to conventional loans. However, many Illinois real estate investors find the slightly higher rate acceptable, especially when there's no income verification needed.

The 5 best areas to invest in Illinois

Once you’re approved for funding, where should you invest in Illinois?


A mere 30-minutes from Chicago, this western suburb blends city amenities and a vibrant business sector with the charm of small-town life. The tree-lined streets downtown have several shopping centers and dining options for all different tastes and preferences.

The median listing home price for Naperville was $539,000 and was trending up 12.5% year-over-year. Per square foot, the median listing price was $217.

Near-West Side

Near-West Side is a neighborhood just west of downtown Chicago. It has lots of community park space for tenants to stretch their legs, including the large Union Park. United Centre is a huge event center and the area's crown jewel, home to the Blackhawks and Chicago Bulls.

The median home listing price is close to the national average at $425K, trending up 6.3% (year-over-year). Tenants interested in moving to Near-West Side can currently find homes ranging from $600 to $15K per month. 


A sought-after investment market, Chicago is a very attractive opportunity for Illinois real estate investors.

First-time homebuyers are often priced out of this market, driving demand for rentals up and rents. With more households renting instead of owning, now could be the best time to invest in the Windy City.

The median listing price is $350,000, well below the average national of $440,000. According to the most recent numbers, the city is just about to enter a balanced market (neither seller's nor buyer's market).


The Ottawa market is a great place to find a bargain for real estate investors. The median price for homes is $155,000 ($114 per sq. ft.), and the median sold price goes up to $183,800.

Located 80 miles from downtown Chicago, Ottawa, IL, is in the heart of Starved Rock Country, a stone's throw from multiple cities and activities—natural outdoor destinations and acclaimed historical and cultural attractions.

Four state parts are within 20 minutes of downtown Ottawa, including Buffalo Rock State Park.

Forest Lake

A suburb of Chicago, Forest Lake's population is only 1,292, which gives it the small-town feel that many families crave, yet it’s only an hour's drive to a downtown metropolis.

Young professionals are keen on this little treasure of a town, which also features some highly-rated public schools.

The recent downward trend here for home prices makes it an attractive option for investors looking to buy. Median home prices are just shy of $310,000 or $211 per square foot.

5 tips for real estate investors in Illinois

What else do you need to know about investing in the state?

Math, math, math

Buying an Illinois investment property goes beyond just the sale price or calculating if you can afford the payments alone. Pay attention to the little details like utilities (if you’re paying them), maintenance, HOA or condo fees, taxes, and insurance.

Location, location, location

As with any city in America, there are good and not-so-good locations. Tastes differ as well. What one family thinks is paradise is a nightmare to another. And everything in between.

Research your target market(s) and find out what amenities are preferred—like good travel options for professionals who need to get to Chicago regularly.

Start modestly

When looking at the potential for returns, you may be tempted to start your real estate investment portfolio with a bang. However, whether they are flipping houses or looking for rental income, even the most seasoned investor is still learning the tricks and pitfalls of the job.

Your first investment property should be something on the modest side, not a lot of renovations needed, something sensible.

The Illinois landlord-tenant law

The Illinois landlord-tenant law governs the world of Illinois property management.

Any real estate investor in Illinois should familiarize themselves with the law. Lawful tenant screening, property marketing, and evictions—avoid pitfalls in these tricky areas by reading up on the rules.

Consider property management

Landlords must deal with lease drafting, marketing, maintenance issues, and tenant screening, to name a few. These tasks take time and can be more difficult if you don't have experience.

It's no wonder why many investors choose to hire professionals to take over. The key word there is professional. Whatever firm you choose, ensure they have a good amount of experience to complete the job.


u003cstrongu003eWhat is DSCR in a loan?u003c/strongu003e

For residential properties, you can calculate DSCR by dividing the income by the payment. For example, a property with a PITIA of $1,000 and rental income of $1,250 would result in a DSCR of 1.25.

Can anyone get a DSCR loan?
Do you need a down payment for a DSCR loan?
Is a DSCR loan right for you?

Start your DSCR loan

A DSCR loan can supercharge your investing accomplishments with no personal income verification and an emphasis on property cash flow.

Get started now and build your portfolio fast.

Submit your DSCR loan scenario.
  • Top-rated landlord insurance
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  • Most competitive rates in the U.S.
  • *We may be compensated if you purchase through this link
  • Top-rated landlord insurance
  • Get a quote in minutes
  • Protect your rentals
  • Most competitive rates in the U.S.
  • *We may be compensated if you purchase through this link

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.