If you own rental property in Connecticut and have ever been told your tax returns do not show enough income to qualify for another mortgage, a DSCR loan is the answer to that problem.
It is the most common way experienced investors keep buying after conventional financing runs out of room. Here is what it is and how it works.
DSCR stands for debt service coverage ratio. A DSCR loan is a mortgage on an investment property where qualification is based on one thing: whether the property's rent covers its own mortgage payment.
Your personal income is not part of the calculation. No tax returns, no W-2s, no pay stubs, no employment verification.
The ratio is a single division problem:
Monthly rent ÷ monthly PITIA = your DSCR
PITIA is principal, interest, taxes, insurance, and HOA dues if there are any.
A DSCR of 1.00 means the rent exactly covers the payment. A 1.25 means the rent is 25% higher than the payment. Most programs want to see 1.00 or better, and the strongest terms usually start around 1.20 to 1.25.
These figures are illustrative only, not a quote.
Say a single-family rental brings in $2,400 a month. The full PITIA on the property comes to $2,000 a month.
$2,400 ÷ $2,000 = 1.20
The property earns 20% more than it costs to carry. That is the number the file is built around — not what you reported on your Schedule E.
Your tax strategy stops working against you. If your CPA has done a good job minimizing your taxable income, conventional underwriting punishes you for it. DSCR does not look at that at all.
No portfolio limit. Conventional programs generally cap you at ten financed properties. DSCR programs typically have no such ceiling. As long as each property carries itself, you can keep buying.
Faster, lighter files. Fewer documents means fewer conditions and fewer chances for something to stall late in the process.
Short-term rental income counts. Many programs now accept STR income, which matters along the Connecticut shoreline and in the Litchfield Hills. Check your town's registration rules first — a program will not use income the town does not permit you to earn.
You can buy in an LLC. Most DSCR programs allow title to be held in an entity, which is harder to do with conventional financing.
DSCR loans tend to fit:
They are not for owner-occupied homes. A DSCR loan is for non-owner-occupied investment property only.
A conventional investment property loan qualifies you. It looks at your debt-to-income ratio, your tax returns, and your employment, and it counts every mortgage you already hold against you.
A DSCR loan qualifies the property. Your credit and assets still matter, but your personal income does not enter the math, and your existing portfolio does not drag down the file.
Conventional financing usually offers better pricing when you can qualify for it. DSCR exists for the very common situation where you cannot, or where the paperwork is not worth it. Plenty of investors use both, depending on the deal.
The short version: most programs start in the low-to-mid 600s on credit, 20% to 25% down for a purchase, and several months of PITIA held in reserves after closing. You will need a lease or an appraiser's market rent estimate to establish the rent figure.
Connecticut adds a wrinkle worth understanding before you make an offer — property taxes sit inside the PITIA figure, and CT mill rates vary enormously from town to town, which means the same building can pass or fail the ratio depending on where it sits.
We covered all of it in detail here: DSCR Loan Requirements in Connecticut.
All terms are subject to program guidelines and review by our Approval Team. Nothing here is an approval or an offer of specific terms.
Debt service coverage ratio. It measures whether a property's rental income covers its full monthly mortgage obligation, including taxes, insurance, and HOA dues.
Correct. DSCR programs do not require tax returns, W-2s, pay stubs, or employment verification. Qualification rests on the property's income along with your credit and assets.
There are options. A larger down payment, buying the rate down, or an interest-only structure can each lift the ratio. Some programs also allow ratios below 1.00 with additional equity.
Yes. Both rate-and-term and cash-out refinances are commonly available, though cash-out generally requires more equity than a rate-and-term refinance.
You can get a real starting point in about two minutes — no Social Security number, no hard credit pull.
Get started here, or call us at (203) 452-9899.
AFC Mortgage Group has been a family-owned Connecticut lender since 1998, based in Monroe, with a 4.9-star rating across 461+ Google reviews.
Written by Gaetano Ciambriello, Home Finance Advisor at AFC Mortgage Group (NMLS #1783508).
AFC Mortgage Group LLC | NMLS #2801 | Monroe, CT | Equal Housing Lender.
This article is for educational purposes only and is not a commitment to lend. It does not constitute financial, tax, or legal advice. Program guidelines, terms, and availability vary and are subject to change. All loans are subject to credit approval, property approval, and Approval Team review. DSCR loans are for non-owner-occupied investment properties only. Consult your tax professional regarding your specific situation.
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