For real estate investors sidelined by traditional income documentation requirements, debt-service-coverage ratio (DSCR) loans are becoming easier to access and are more widely available as lenders refine underwriting and gain confidence in the product’s performance.
Like other seemingly “nontraditional” loans, lenders took some time to dip their toes into in the DSCR market. Marc Halpern, CEO of Foundation Mortgage, said that 2025 marked a year of the product category gaining “greater acceptance” among mortgage lenders.
“The sustained demand for rental properties, driven by a tight housing market and rising rents, has also fueled investor activity in real estate, making DSCR the preferred financing tool for these investments. Secondary investor appetite for non-QM RMBS is also growing, and we may see DSCR enter this market next year in a meaningful way,” Halpern said.
Max Slyusarchuk, CEO of AD Mortgage, said that the greater availability of DSCR products is tied to higher acceptance in the secondary market.
“The comfort in DSCR comes not from lenders, but from the final bond buyers and investors,” he said. “Lenders can produce whatever the markets will buy.”
Safe and sound underwriting
Slyusarchuk added that two reasons have contributed to secondary market comfort. The first is that DSCR loans are easier to underwrite, and two, there are precise calculations for the underlying loan-to-value ratios.
“I think the uptick in 2025 came from just the realization that a lot of loans like that could be done, and we can underwrite them easier and faster. We have the proof to educate bond buyers on why this product is OK,” he said.
“I can tell you that DSCR is an easier loan to do. It is a higher down payment, it’s a higher credit score requirement, and performance is really good. … Investors should not be worrying about performance. And I think it’s going to continue growing in the next few years, for sure.”
Stacy Speas, senior vice president of operations for Cornerstone Servicing, agreed that DSCR loans are performing well despite their nontraditional nature.
“To be honest, even though DSCR is not a traditional underwrite …. we definitely are seeing, in terms of delinquency, that it is not materially different from a traditional underwrite,” Speas said. “Since the income streams are not traditional, being able to rely on that potential rental income, as opposed to the traditional W-2 income, hasn’t proven to be a big deterrent in terms of lasting delinquency. So for our clients and our investors, that’s good.”
Speas said that as long as consumers are waiting for interest rates to drop, a strong rental market will reign. And while that sounds like bad news, there is a bright side.
“I think it’s very difficult right now for consumers to achieve homeownership. So to the extent that there are landlords who can provide that additional rental (supply), that’s going to continue to be a strong market,” she said.
Attractive offerings
As such, a desire for lenders to get borrowers into homes means that standards are changing. Jessica Vance, owner of San Diego-based Jessica Vance Real Estate and Mortgages, a dba of Anchor Mortgage Funding Inc., said she’s seen lenders offer lower DSCR ratios.
“Most lenders like to see a DSCR ratio of 1.0 or better, which means that at the interest rate given, with 20% down, accounting for PITI, the property breaks even or better. That being said, we now have wholesale lenders who are willing to do DSCR ratios of 0.8 and no ratio,” she said.
“The no-ratio DSCR loan is relatively new, and I expect that to be an avenue investors use more and more once the word is out that that type of DSCR loan exists.”
Jeremy Schachter, a Phoenix-based branch manager for Fairway Home Mortgage, called DSCR “the product of the year” due to how versatile it proved to be amid a stubborn rate environment and a perpetual renter population.
“Many investors are self-employed and have extensive deductions, which can inhibit them from qualifying for a mortgage,” Schachter said. “Even borrowers who can document income may choose to go this route because interest rates are competitive.
“… I see this program to be even more popular in 2026 with investors who want to grow their real estate portfolio.”
With larger players like Rocket Pro capitalizing on the DSCR momentum, Roby Robertson of LoanLogics said that 2025 served as a “proving-out year” for the product.
As a result, he expects significant scale and volume growth in 2026 as others in the industry expand their programs and institutional investors increase their allocations.
