The Ultimate Guide to DSCR Loans in Phoenix & Scottsdale
For real estate investors in the booming Phoenix and Scottsdale markets, the DSCR loan is a game-changer. It's a powerful financing tool that allows you to scale your rental portfolio based on investment potential, not your personal W-2 income.
What is a DSCR Loan?
DSCR stands for "Debt Service Coverage Ratio." In simple terms, it's a loan that qualifies you based on one simple metric: Does the property's rental income cover the mortgage payment?
If the Debt Service Coverage Ratio is 1.0 or higher (meaning rents equal or exceed the mortgage payment), you can be approved. This is why it's the preferred loan for savvy investors.
The Top 3 Benefits for Arizona Investors
- No Personal Income Required: We don't need to see your tax returns, pay stubs, or W-2s. Qualification is based on the property's cash flow.
- No Employment Verification: Perfect for self-employed investors, entrepreneurs, or those with complex income streams.
- Build Your Portfolio Faster: Unlike conventional loans that limit you to 10 properties, DSCR loans have no such limit. You can finance 5, 15, or 20+ properties.
How is the DSCR Ratio Calculated?
It's a straightforward formula: Gross Rental Income / Monthly PITI = DSCR
(PITI = Principal, Interest, Taxes, and Insurance)
Example: A Phoenix rental property has a projected rent of $2,500/month. The total proposed mortgage payment (PITI) is $2,200/month.
$2,500 / $2,200 = 1.14 DSCR
Since the 1.14 ratio is greater than 1.0, this property qualifies!
Want to see how it's done? See our step-by-step calculation guide.
Can I Use a DSCR Loan for an Airbnb or VRBO?
Yes! This is one of the most powerful uses for a DSCR loan, especially in a top tourist market like Scottsdale. We can use the projected short-term rental income (from sources like AirDNA) to qualify the property, making it ideal for financing your next Airbnb or VRBO. Learn more about financing short-term rentals.
Ready to see if your next investment property qualifies? Contact me today to analyze a deal or get pre-approved for your next purchase.
Jonathan Moses
Senior Loan Officer | NMLS #2064741
This guide was prepared by Jonathan Moses (NMLS #2064741), the senior loan officer and founder of Roadrunner AZ Lending. With years of experience in the Phoenix and Scottsdale markets, Jonathan is dedicated to providing expert, transparent advice. Learn more about Jonathan.