Can I Qualify for an Investment Property Loan Without Showing My Tax Returns?
Quick Answer
DSCR (Debt Service Coverage Ratio) loans allow you to qualify for investment property financing without providing tax returns, W-2s, or personal income verification. Lenders approve you based solely on the property's rental income. Requirements: 20-25% down payment, 660+ credit score, and a DSCR ratio of 1.0 or higher (rental income covers or exceeds the mortgage payment). Interest rates are typically 0.5-1.5% higher than conventional investment property loans. DSCR loans work well for self-employed investors, LLC owners, and anyone with tax deductions that lower reported income but still have strong cash flow.
By Aditya Choksi, NMLS #2055084 | California Licensed Mortgage Loan Officer | 21st Century Lending
Published: January 19, 2026 | Updated: January 26, 2026
Yes, you can qualify for an investment property loan without showing tax returns. The loan program that makes this possible is called a DSCR loan (Debt Service Coverage Ratio loan), and it has become one of the most popular financing options for real estate investors in California. Instead of verifying your personal income through W-2s, pay stubs, or tax returns, DSCR lenders approve you based solely on whether the property's rental income covers the mortgage payment.
If you have been turned down for a conventional investment property loan because your tax returns show low income (thanks to legitimate business deductions), or if you simply want a faster, more streamlined approval process, a DSCR loan might be exactly what you need.
What Is a DSCR Loan?
A DSCR loan is a type of non-QM (non-qualified mortgage) designed specifically for investment properties. Unlike traditional mortgages that require extensive income documentation, DSCR loans evaluate one primary factor: can this property pay for itself?
The lender calculates the Debt Service Coverage Ratio by comparing the property's gross rental income to its total monthly debt payment. If the rental income covers or exceeds the payment, the property "qualifies" regardless of your personal financial situation.
This approach benefits investors who:
- Are self-employed with complex tax situations
- Take significant business deductions that lower reported income
- Own multiple properties and have maxed out conventional loan limits
- Want to close quickly without gathering months of income documentation
- Hold properties in an LLC or other business entity
How the DSCR Calculation Works
The DSCR formula is straightforward:
DSCR = Monthly Gross Rental Income / PITIA
PITIA stands for:
- Principal (loan paydown portion of payment)
- Interest (cost of borrowing)
- Taxes (monthly property tax escrow)
- Insurance (homeowners/landlord insurance)
- Association dues (HOA fees, if applicable)
Example Calculation
Let's say you're purchasing a rental property in Riverside County with these numbers:
| Item | Amount |
|---|---|
| Monthly Rent | $2,800 |
| Principal & Interest | $1,850 |
| Property Taxes | $320 |
| Insurance | $150 |
| HOA Fees | $80 |
| Total PITIA | $2,400 |
DSCR = $2,800 / $2,400 = 1.17
A DSCR of 1.17 means the property generates 17% more income than needed to cover the monthly payment. This would qualify with most DSCR lenders.
What DSCR Ratio Do You Need to Qualify?
Minimum DSCR requirements vary by lender, but here are the general tiers you will encounter:
| DSCR Ratio | What It Means | Typical Terms |
|---|---|---|
| 1.25+ | Property generates 25%+ surplus income | Best rates, lowest down payment options |
| 1.10-1.24 | Solid positive cash flow | Standard rates, 20-25% down |
| 1.00-1.09 | Break-even (rent equals payment) | Higher rates, may require 25%+ down |
| 0.75-0.99 | Negative cash flow | Available with some lenders, requires 25-35% down and 700+ credit |
| No-Ratio | DSCR not calculated | Asset-based lending, highest down payments required |
Most California investors target a DSCR of at least 1.0, meaning the property at minimum pays for itself. Properties with ratios above 1.25 often qualify for the most competitive rates.
Who Are DSCR Loans Best For?
DSCR loans solve specific problems for specific investors. You might be an ideal candidate if you fit one of these profiles:
Self-Employed Business Owners
If you run a business and write off legitimate expenses, your tax returns may show a fraction of your actual earning power. DSCR loans ignore your tax returns entirely, so your deductions do not hurt your borrowing ability.
Experienced Real Estate Investors
Portfolio investors often hit limits with conventional financing (Fannie Mae caps you at 10 financed properties). DSCR loans let you continue scaling without personal income restrictions.
High Net Worth Individuals
Investors with complex income from multiple sources, investments, or business interests often find DSCR underwriting simpler than documenting every income stream for a conventional loan.
Short-Term Rental (Airbnb) Investors
Many DSCR lenders accept projected short-term rental income based on market data, making these loans viable for vacation rental investors in California markets like Palm Springs, Big Bear, or San Diego beach communities.
Investors Purchasing Through an LLC
DSCR loans can close in the name of an LLC, allowing you to maintain liability protection while financing investment properties.
DSCR Loan Requirements
While DSCR loans are more flexible than conventional mortgages, they do have requirements:
Credit Score
Most lenders require a minimum credit score between 640 and 680. Some programs accept scores as low as 620, though you will pay higher rates. Borrowers with scores above 700 typically receive the best terms.
Down Payment
Expect to put down 20-25% for most DSCR loans. If your DSCR is below 1.0 or your credit score is on the lower end, you may need 25-30% down. Some "no-ratio" programs require 30-35%.
Cash Reserves
Lenders typically require 6-12 months of PITIA payments in reserve after closing. This ensures you can cover the mortgage if the property experiences vacancy.
Property Types
DSCR loans work for:
- Single-family homes
- 2-4 unit properties
- Condos (warrantable)
- Short-term rentals (Airbnb/VRBO)
- 5+ unit multifamily (with specialized lenders)
The property must be investment-only. DSCR loans are not available for primary residences or second homes.
Rental Income Documentation
Lenders verify rental income through:
- Existing lease agreements (for occupied properties)
- Market rent analysis from the appraiser (for vacant properties or purchases)
- Actual rental history (for short-term rentals with track record)
What Do DSCR Loan Rates Look Like?
DSCR loans typically carry interest rates 0.5% to 1.5% higher than conventional investment property loans. As of early 2026, expect rates in the mid-6% to 8% range depending on your DSCR ratio, credit score, down payment, and property type.
Here's how rates generally correlate to DSCR:
| Factor | Impact on Rate |
|---|---|
| DSCR 1.25+ | Best available rate |
| DSCR 1.00-1.24 | +0.25-0.50% |
| DSCR below 1.0 | +0.50-1.00% |
| Credit score below 680 | +0.25-0.75% |
| Cash-out refinance | +0.125-0.375% |
| Short-term rental | Varies by lender |
While rates are higher than conventional loans, many investors accept this trade-off for the benefits of no income documentation, faster closings, and the ability to finance unlimited properties.
DSCR vs. Conventional Investment Property Loans
| Feature | DSCR Loan | Conventional Loan |
|---|---|---|
| Income verification | None (property-based) | Full documentation (tax returns, W-2s) |
| Debt-to-income ratio | Not calculated | Must meet 43-50% DTI limit |
| Property limit | Unlimited | 10 financed properties max |
| Down payment | 20-25% | 15-25% |
| Interest rates | Higher (6.5-8%+) | Lower (6-7%) |
| Closing timeline | 2-3 weeks typical | 4-6 weeks typical |
| LLC ownership | Yes | Difficult/uncommon |
Common Questions About DSCR Loans
Can I use rental income from the property I'm buying?
Yes. Lenders use projected market rent from the appraisal for purchase transactions, even if the property is vacant. For refinances, they typically use actual lease income.
Do DSCR lenders check my employment?
No. DSCR lenders do not verify employment, request pay stubs, or require employer contact information. The loan is based entirely on the property's performance.
Can I get a DSCR loan with bad credit?
Most lenders require at least 620-640. If your score is below this threshold, you may need to work on credit improvement before qualifying.
Are DSCR loans available in California?
Absolutely. DSCR loans are widely available throughout California, with strong investor demand in markets like Los Angeles, Orange County, the Inland Empire, San Diego, and the Central Valley.
How fast can I close on a DSCR loan?
Most DSCR loans close in 2-3 weeks once the appraisal is complete, significantly faster than conventional loans that require income underwriting.
Can I refinance into a DSCR loan?
Yes. DSCR refinances are common for investors who want to extract equity or move away from personal income documentation requirements. Both rate-and-term and cash-out refinances are available.
Is a DSCR Loan Right for Your Next Investment?
DSCR loans have transformed investment property financing by removing the personal income barrier that stops many capable investors. If you have good credit, sufficient reserves, and a property that produces income, your tax returns become irrelevant to the approval process.
However, DSCR loans are not for everyone. If you qualify for conventional financing and the property meets agency guidelines, you will likely get a lower rate. DSCR loans make the most sense when:
- Conventional income documentation is a barrier
- You need to close quickly
- You want to hold the property in an LLC
- You have exceeded conventional loan limits
Ready to explore whether a DSCR loan fits your investment strategy? Connect with a California mortgage professional who specializes in investor financing to discuss your specific situation and run the numbers on your target property.
Last verified: January 2026. DSCR loan requirements, rates, and availability vary by lender and are subject to change. This information is for educational purposes and does not constitute a loan offer. Contact a licensed mortgage professional for personalized guidance.