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For real estate investors with complex or unconventional income, traditional mortgage options often come with challenges. Fortunately, there are specialized loan products like Debt Service Coverage Ratio (DSCR) loans and Bank Statement loans that provide flexible alternatives. Understanding these two popular non-QM (non-qualified mortgage) options can help investors choose the best fit for their unique financial situations.
What Are DSCR Loans?
DSCR loans are designed for real estate investors who want to qualify based on a property’s cash flow, rather than personal income. These loans calculate a property’s Debt Service Coverage Ratio (DSCR) by dividing its gross rental income by the total monthly debt payments (PITIA). If the ratio meets the lender’s minimum requirement—typically around 1.0 to 1.25—the loan can be approved without the need for W-2s, tax returns, or pay stubs.
Key Features of DSCR Loans:
- Qualification based on rental income, not personal income
- Typically requires a DSCR of 1.0 or higher
- No employment or income verification required
- Ideal for LLCs or investors with multiple properties
- Higher interest rates and lower LTV limits (typically 70-80%)
Learn more about DSCR loans here
What Are Bank Statement Loans?
Bank statement loans are another popular choice for investors who struggle to verify their true earning power through traditional means. Instead of using tax returns, these loans rely on 12-24 months of personal or business bank statements to calculate qualifying income. This is particularly advantageous for self-employed investors, business owners, and others who have significant tax write-offs.
Key Features of Bank Statement Loans:
- Qualification based on bank deposits instead of tax returns
- Allows for complex income profiles, including business owners
- Typically requires 12-24 months of bank statements
- Often allows for higher debt-to-income (DTI) ratios
- Flexible terms and higher loan limits
Discover more about Bank Statement loans here
Key Differences Between DSCR and Bank Statement Loans
| Feature | DSCR Loans | Bank Statement Loans |
| Qualification | Based on property income | Based on personal/business bank deposits |
| Documentation | Lease agreements, rent schedule | 12-24 months of bank statements |
| Use Case | Rental properties, LLCs | Self-employed, high-write-off investors |
| Speed of Approval | Faster | Moderate |
| Loan-to-Value (LTV) | Typically 70-80% | Up to 85% or higher |
| Interest Rates | Generally higher | Varies, often lower than DSCR |
Which Loan is Right for You?
Choosing between a DSCR loan and a Bank Statement loan depends on your income profile and investment strategy:
- Choose DSCR if: You primarily rely on rental income, have multiple properties, or operate through an LLC.
- Choose Bank Statement if: You have complex personal income, run a business, or want to leverage personal cash flow for qualification.
FAQs
Can I use a DSCR loan for a property I plan to live in?
No, DSCR loans are strictly for non-owner-occupied investment properties.
Are DSCR loans easier to qualify for than conventional loans?
Yes, because they focus on property cash flow rather than personal income.
How long does it take to close a DSCR or Bank Statement loan?
DSCR loans can close in as little as 2-3 weeks, while Bank Statement loans may take 4-6 weeks.
Ready to Explore Your Options?
If you’re ready to explore these flexible financing options, get a personalized rate quote today. Whether you’re growing a rental portfolio or need a better way to verify income, there’s a solution that fits your strategy.
Read Next
- Best Loans for Self-Employed Borrowers
- How to Choose Between a HELOC and Cash-Out Refinance
- Investment Property HELOC Lenders
Final Thoughts
Both DSCR and Bank Statement loans offer unique advantages for investors with complex income profiles. By understanding the differences and selecting the right product, you can unlock more investment opportunities and build long-term wealth.
Get Expert Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Our advice 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.
