DSCR Income Documentation
DSCR Income Documentation
The defining feature of a DSCR loan is that it does not require personal income or employment documentation from the borrower, focusing entirely on the performance of the investment property itself.
Here is a breakdown of the DSCR Income Documentation, specifically highlighting the types of income-related documents that are not required, and the property documents that are required.
The Core Principle: No Personal Income Documentation Required
DSCR loans are primarily underwritten based on the subject property’s cash flow and are designated for business purposes only. Therefore, standard income verification documents are not required.
| Document Type | Requirement for DSCR Loans |
| W-2s or Pay Stubs | Not required |
| Tax Returns (Personal or Business) | Not required. IRS Tax Transcripts are not required on DSCR loans. |
| Personal Income/Employment Verification | No income or employment is verified. The employment section of the application should be left blank. |
| Debt-to-Income (DTI) Ratio | Not calculated or required. |
Documentation Required for Income Calculation (Gross Rents)
While personal income is waived, DSCR loans require documentation to establish the property’s income potential (Gross Rents), which forms the numerator of the DSCR calculation.
Document Category | Specific Documentation Required |
Appraisal/Market Rents | Required: A Fannie Mae Form 1007 (Single-Family Comparable Rent Schedule) or Form 1025 (Multi-Family) must be provided by the appraiser to determine the market rent. |
Executed Lease | If the property is currently leased, the borrower must provide the executed lease agreement. We typically uses the lesser of the lease amount or the appraiser’s market rent to calculate Gross Rents. |
Short-Term Rental (STR) Income | If the property is used as a short-term rental (e.g., Airbnb, VRBO), documentation is based on operating history (typically 12 months) from the booking platform or property manager. Alternatively, some programs require a supplemental appraisal form or STR analysis by an AMC. |
Vacant Property | For purchase transactions, the property may be vacant, and the gross market rents from the appraisal forms (1007/1025) will be used to qualify. |
Other Required Documents (Non-Income)
While DSCR loans bypass traditional income verification, we still requires a set of non-income-related documents to assess risk, property value, and compliance:
- Application & Credit: A loan application with basic borrower and property details, and a Credit Authorization form to run a credit report and background report.
- Reserves: Two months of bank statements or equivalent asset documentation showing that the borrower has sufficient liquid assets (typically 3 to 12 months of PITIA payments) to cover debt payments in case of vacancy or turnover.
- Property Insurance: Property insurance is required, and if the property is in a flood zone, flood insurance is also necessary. Insurance must include 6 months rent loss coverage for some programs.
- Closing/Compliance Documents: A Business Purpose and Occupancy Affidavit must be executed by the borrower to confirm the non-owner-occupied, investment status of the loan.
- Entity Documents: If the loan is closed in the name of an LLC, entity documents such as the Certificate of Good Standing, Operating Agreement, and Personal Guaranty are required.
FAQ's
Yes, Short-Term Rental (STR) income is often permitted for DSCR qualification, although specific rules apply. Verification may require a supplemental appraisal form, third-party management statements, or a 12-month rental history. Note that STR qualifying income often requires a higher minimum DSCR, such as 1.15 or 1.25.
Yes, asset documentation is required to satisfy reserve requirements. A common requirement is documenting 6 months of reserves based on the subject property’s PITIA (or ITIA) payment.
Not necessarily. While a DSCR above 1.0 indicates positive cash flow, many programs allow for a minimum DSCR as low as 0.75 or 0.80. Loans with a DSCR less than 1.0 may require more reserves or have higher qualification hurdles.
DSCR loans are strictly designed for investment property transactions that are designated for business purposes only; they cannot be used for a primary residence.
PITIA stands for the total annual or monthly payments for Principal, Interest, Taxes, Insurance, and Association (HOA) fees. For Interest Only (I/O) DSCR loans, the calculation may use ITIA (Interest, Taxes, Insurance, and Association fees) instead of the fully amortized PITIA payment.
Rental income verification involves obtaining documents such as an appraisal (specifically Form 1007 or Form 1025) to determine market rent, and sometimes an executed lease agreement, especially on refinance transactions.
The DSCR is calculated by dividing the property’s Gross Rents by the Proposed PITIA (Principal, Interest, Taxes, Insurance, and Association dues).
No, because borrower income is not verified for this program, the Debt-to-Income (DTI) ratio is not calculated for DSCR products.
No, personal income or employment verification is typically not required for the DSCR product. This means that conventional documentation like W-2s, paystubs, or tax transcripts are generally not necessary.
Qualification for a DSCR loan is determined solely based on the property’s cash flow, calculated using the Debt Service Coverage Ratio (DSCR). Borrower employment and personal income are generally not required to qualify.
527 Sycamore Valley Rd W, Danville, CA 94526
Toll Free Call : (866) 280-0020
For informational purposes only. No guarantee of accuracy is expressed or implied. Programs shown may not include all options or pricing structures. Rates, terms, programs and underwriting policies subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans subject to underwriting approval. Some products may not be available in all states and restrictions may apply. Equal Housing Opportunity.
Interactive calculators are self-help tools. Results received from this calculator are designed for comparative and illustrative purposes only, and accuracy is not guaranteed. Shining Star Funding is not responsible for any errors, omissions, or misrepresentations. This calculator does not have the ability to pre-qualify you for any loan program or promotion. Qualification for loan programs may require additional information such as credit scores and cash reserves which is not gathered in this calculator. Information such as interest rates and pricing are subject to change at any time and without notice. Additional fees such as HOA dues are not included in calculations. All information such as interest rates, taxes, insurance, PMI payments, etc. are estimates and should be used for comparison only. Shining Star Funding does not guarantee any of the information obtained by this calculator.
Privacy Policy | Accessibility Statement | Term of Use | NMLS Consumer Access
CMG Mortgage, Inc. dba Shining Star Funding, NMLS ID# 1820 (www.nmlsconsumeraccess.org, www.cmghomeloans.com), Equal Housing Opportunity. Licensed by the Department of Financial Protection and Innovation (DFPI) under the California Residential Mortgage Lending Act No. 4150025. To verify our complete list of state licenses, please visit www.cmgfi.com/corporate/licensing