The Ultimate Guide to DSCR Loans for Foreign Nationals

The best-kept secret in real estate just might be DSCR loans and at Waltz, we’re happy to share it.

Short for debt-service-coverage-ratio (DSCR), these loans help real estate investors qualify based on a property’s cash flow, not personal income. For foreign nationals who may not have U.S. credit or W-2 income, DSCR loans make buying or refinancing rental properties possible without the usual roadblocks.

In this guide, you’ll learn what DSCR loans are, how they work, who they’re for, how to qualify, and how to compare lenders. Whether you’re exploring long-term rentals, short-term vacation properties, or refinancing existing assets, this article will help you understand how DSCR loans open the door to U.S. real estate investing.

Key takeaways

• DSCR loans are investment property loans that qualify borrowers based on a property’s ability to generate enough rental income to cover its monthly debt payments.
  
  
• These loans are part of the non-QM (non-qualified mortgage) category, designed for foreign nationals and self-employed investors who don’t meet traditional underwriting rules.
  
  
• Some lenders require higher down payments (typically 25–30%) to offset risk.

What is a DSCR loan?

A debt-service-coverage-ratio (DSCR) loan is a type of mortgage that measures a property’s ability to generate enough income to cover its debt obligations. In other words, it focuses on cash flow, not personal income.

Unlike a traditional mortgage, which evaluates your debt-to-income ratio (personal income versus personal debt), a DSCR loan looks strictly at the property itself. Lenders determine eligibility by comparing rental income to total monthly mortgage payments.

For real estate investors, this approach removes major barriers like needing U.S. credit history or a steady U.S. paycheck. The property’s projected income tells the story.

These loans fall under the broader category of non-QM (non-qualified mortgage) products, meaning they’re designed for borrowers who don’t fit traditional lending criteria. Many foreign investors, self-employed individuals, or business owners use non-QM loans to finance U.S. real estate when traditional loan options aren’t available.

How DSCR loans work

A DSCR loan measures how much income a property generates compared to its monthly debt payments. The goal is to ensure that the property can cover its own expenses without relying on your personal income.

The DSCR formula is simple: DSCR = Net Operating Income (NOI) / Total Debt Service

If the result is 1.0, then the property breaks even as its income equals its total monthly mortgage costs. A ratio above 1.0 indicates positive cash flow, meaning the property earns more than it costs to own.

Here’s how the process works step by step:

1. Estimate the property’s income. Lenders review actual or projected rent based on leases or verified market data.

2. Calculate NOI. Subtract operating expenses (like maintenance or management fees) from rental income.

3. Determine total debt service. Add up monthly principal, interest, taxes, and insurance.

4. Compute the DSCR. Divide NOI by total debt service. A higher ratio shows the property is financially sound.

5. Evaluate eligibility. Many lenders look for a DSCR above 1.0, with 1.2 or higher preferred for stability.

Because the loan is approved based on the property’s performance, not the borrower’s personal finances, DSCR loans are ideal for foreign nationals, business owners, and self-employed investors seeking to scale efficiently through leverage.

How to calculate a DSCR score

DSCR loans use different criteria and are calculated differently than conventional financing options. When a lender reviews a conventional loan, they take into account an individual’s ability to repay the loan which is called your debt-to-income ratio. In contrast, a DSCR loan focuses on the rental property’s ability and income to pay for the loan itself. 

The lender will run a calculation to see if the property will make money. The formula is as follows:

DSCR = Net Operating Income (NOI) / Total Debt Service

NOI determines what’s left over from your rental income after all expenses are paid. Expenses might include property management fees, maintenance, utilities, or other day-to-day operational costs.

Total Debt Service= Principal + Interest + Taxes + Insurance

Your total debt service is basically all of the components of your mortgage. In a loan payment, the principal is the amount that goes toward paying down the loan, while interest represents the profit the lender makes from the loan. Keep in mind that if you have Homeowners Association (HOA) fees, this would also be included here.

DSCR purchase example

Imagine that you purchased a rental property in Miami, Florida in a great location. You find renters who pay  $4,000 a month and you don’t have any  additional operating expenses, while the mortgage you own to your lender is $3,000 per month. Let’s calculate the DSCR based on those numbers:

‍DSCR =$4,000 (NOI) / $3,000 (Total Debt Service)

Based on the calculation above, the property has a DSCR of around 1.33. From the lender’s perspective, this is favorable because it provides a significant cushion of income above the break even point. It’s also more favorable to the investor for the same reason. Think of the lender as your teammate when it comes to DSCR loans– when you win, they win.

Learn more: DSCR loan calculator

How to improve your DSCR

1. Increase rental income. Adjust rent to align with market rates or explore short-term rental strategies if allowed.

2. Reduce operating expenses. Limit discretionary costs like management fees or maintenance contracts.

3. Increase your down payment. Lowering your loan amount reduces total monthly debt service.

4. Refinance to a lower rate. A lower interest rate can reduce your payment and boost the ratio.

5. Eliminate non-essential debt. Pay off smaller property-related obligations to improve cash flow margins.
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Even small changes can make a big difference. At Waltz, our team can help you identify the simplest path to meet DSCR eligibility and secure financing faster.

When to use a DSCR loan

What’s your real estate investment strategy? DSCR loans are great for foreign real estate investors pursuing certain avenues, but not others. Before asking a lender about a DSCR loan, it’s crucial to understand when it makes sense to use one.

Use a DSCR loan when… 

In short, DSCR loans are used for rental properties. There are loan products for both long-term and short-term rental properties:

• Long-term rental properties. Ideal for properties leased to tenants on annual or multi-year agreements. This strategy provides steady, predictable cash flow, making them a great option for investors looking for stability and long-term returns.
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• Short-term vacation rentals. With the rise of platforms like AirBnb and VRBO, short-term rentals have proven to be viable business models. DSCR loans can also help investors acquire vacation rentals intended for these purposes. Since an AirBnB’s rental income varies greatly by location, property type, and other factors, lenders often use projections from AirDNA to help gauge potential income. Note, not all lenders offer loans for short-term rentals. 

‍Waltz can help you get a DSCR loan to fund your next AirBnb or a cash flowing rental property.

Don’t use a DSCR loan if…

While DSCR loans offer flexibility, they’re not without limits. Because qualification depends entirely on rental income, properties with inconsistent or uncertain cash flow can pose a higher risk. If a property isn’t generating reliable rent, or if market conditions shift, it can become harder to maintain the required DSCR ratio, affecting refinance or future lending options.

• Primary residence. Your home is not an investment property, which eliminates this as an option. 
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• Personal Vacation property. Want a condo by the beach for the warmer weather months? While that sounds amazing, a second home is not eligible for a DSCR loan. 
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• Fix-and-flips. Flipping houses can be lucrative, but this strategy often requires short-term financing. These are also at higher interest rates because of the risks associated with them. Once the property is renovated, however, some investors like refinancing out of a fix-and flip loans into DSCR loans.
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• Land development. Have you ever wanted to build a house from the ground up? That’s what we like to call land development. Like flipping, this has a higher risk profile and often uses short-term financing options like bridge loans.
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• Commercial. If you want to lease commercial property such as a gas station or a restaurant, a DSCR loan is unlikely the right fit as the analysis varies.

Customizing your loan terms and conditions

DSCR loans aren’t a one-size fits all solution. What you want out of an investment property might be totally different than another investor. There are a variety of terms and conditions to explore as you speak with different lenders. Be sure to ask about DSCR loan requirements, such as the following:

• Loan length/repayment period. 30 and 15 year repayment periods are the most common, but some lenders often have a number of selections to choose from. Your monthly payment and total interest paid over the length of the loan will be affected by this selection.
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• Adjustable rate mortgage. Sometimes lenders offer loans that stay at a given interest rate for a certain period of time, then adjust based on the market after that timeframe. 
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• Fixed rate mortgage. With a fixed rate mortgage, the interest rate remains constant throughout the life of the loan. This stability can make budgeting easier, as your monthly payments won’t fluctuate with market changes. 
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• Prepayment penalties. DSCR lenders want to incentivize investors to hold properties for multiple years. There are different options for the number of years you need to hold to avoid these penalties depending on your lender.

As you begin to mix-and-match different options, be aware that your interest rate may vary depending on these factors. Be sure to ask your lender how each condition impacts your overall payments.

Lender considerations

To fund, or not to fund, that is the question! As a lender determines the feasibility of your DSCR loan application, there are certain general guidelines each will follow. Some of the most common considerations include:

• Loan-to-Value (LTV) ratio. If you’re buying an investment property with financing, you’re using leverage.  The less money you put into a deal, the higher your leverage. As such, DSCR lenders often look for a 75% LTV or below because it limits their risk and shows that you’re serious as an investor by having significant skin in the game. So if your investment property is worth $100,000 they may fund up to $70,000 as a mortgage. In this case, you would need the difference ($30,000) as a downpayment.
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• Property type. Most DSCR loans are available for single-family homes and duplexes. However, some lenders may offer DSCR loans for multi-family and commercial properties also known as commercial DSCR loans. With Waltz, you can get DSCR loans on properties with up to 4 units.
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• Loan Limits: These range from lender to lender, some will let you borrow up to $2 million. 
  
  
• Business Structure: To be eligible for a DSCR loan, the borrower must do so under an American business entity. If you don’t have one, Waltz can help– our investor kit sets you up with an LLC and everything else you need to start investing in U.S. real estate.
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• DSCR score. Generally speaking, the higher the number is above 1 (the break even point), the more likely it will be considered for financing. The better the deal you find, the better your chances are of getting approved. The next section covers this equation in depth.

Pros and cons of DSCR loans

Like any financing option, DSCR loans come with both advantages and trade-offs. For many investors, especially foreign nationals, removing barriers created by traditional lenders is important. However, understanding the limitations helps you make a more informed decision and plan your investment strategy with clarity.

Pros

• Qualification is based on the property’s income, not personal income or U.S. credit history.
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• Ideal for foreign nationals and self-employed investors without traditional documentation.
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• Available for both short-term and long-term rental properties.
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• Faster closing timelines with less documentation required.
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• Can be used for refinancing, including cash-out options to scale your portfolio.

Cons

• Interest rates can be higher than conventional mortgages due to investor-focused risk profiles.
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• Some lenders require higher down payments (typically 25–30%) to offset risk.
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• Prepayment penalties may apply if you sell or refinance early.
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• Not eligible for primary residences or personal vacation homes.
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• Approval depends on strong rental performance—if income drops, refinancing options may narrow.
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Learn more: The pros and cons of DSCR loans

DSCR loan requirements

To qualify for a DSCR loan, you’ll need to meet specific property and borrower criteria. While these loans are designed to be more flexible than conventional mortgages, most lenders, including Waltz, follow similar guidelines to ensure that the property’s income can reliably cover its debt.

Here’s what’s typically required:

• Minimum DSCR: A ratio of 1.0 or higher is needed to qualify, though most lenders prefer 1.2+ for added stability.
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• Loan-to-Value (LTV): Up to 70–75%, meaning you’ll generally need a 25–30% down payment.
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• Entity ownership: The loan must be held under a U.S.-based business entity (usually an LLC). Waltz’s Investor Kit can set up your LLC and EIN in minutes.
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• Property type: Applies to 1–4 unit residential investment properties, including single-family homes, condos, townhomes, and multi-families.
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• Documentation: Lenders verify rental income, property insurance, and bank statements, but not personal income or credit history.
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Learn more: DSCR loan documents to apply

How to get a DSCR loan

Getting a DSCR loan is often simpler than applying for a traditional mortgage. The process focuses on verifying the property’s income potential rather than your personal financial background.

Here’s a step-by-step overview of what to expect:

1. Estimate your rental income: Start by evaluating how much rent your property is expected to generate. For existing rentals, you can use current leases. For new or short-term rental properties, use market data to build a forecast. Use our DSCR calculator to model your loan

2. Form a U.S. business entity: Because DSCR loans are issued to businesses, not individuals, you’ll need an LLC or similar entity. Waltz’s Investor Kit can form your LLC and EIN number in minutes, saving weeks of setup time.

3. Prepare your documentation: Gather the documents your lender will need, such as entity formation records, bank statements, and proof of rental income.

4. Apply and receive your loan quote: Submit your property details, income projections, and desired loan amount. Waltz uses this information to generate a personalized quote, often within days. Get a quote.

5. Appraisal and underwriting: An appraisal confirms the property’s value and verifies income expectations. During underwriting, lenders review your DSCR ratio and loan-to-value (LTV) to confirm eligibility.

6. Sign and close digitally: Once approved, you’ll review and sign your loan documents electronically. In most states, Waltz supports fully remote closings—no in-person signing required in many instances.

How to get a DSCR loan as a foreign national

The not-so-good news: eligibility standards vary by lender, and many make it difficult for foreign investors to qualify. On top of that, international buyers often face additional hurdles, from entity setup to transferring funds, that can slow down or block a deal.

The good news: you don’t need to be a U.S. citizen to qualify for a DSCR loan¹.

At Waltz, we're breaking down barriers to make DSCR loans more accessible for non-U.S. real estate investors. These are some of the most common problems foreign nationals face and how we help you overcome them:

• Credit score. Many lenders will request your American credit score. If you don’t have one, how is it possible to get a loan? Waltz reviews your financial history wherever you call home.
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• Identification. What if you don’t have a social security number or an American passport? Not a problem, Waltz requires your passport from your home country and gathers all relevant information accordingly. 
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• Proof of income. Even though DSCR loans are based on the property’s performance, it’s still important to know how you earned your money and what your bank statements look like. Typically, we'll ask for documents like Financial Statements, Bank Statements, income source information, and other relevant paperwork to comprehensively understand your financial situation. We make it easy for you to upload onto our platform in a fully digital experience.
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• Forming a business. DSCR loans are only issued to businesses, but forming an LLC can take months, especially for foreigners. You who might need to fax certain documents or even mail them– that’s not a typo, it’s an old school process. At Waltz, we take the new school approach: you can purchase your  LLC with an EIN number in just 20 minutes or so. That way, you can start buying properties right away!
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• U.S. bank account². Operating a business and purchasing real estate requires a U.S. bank account. As part of your investor kit when you onboard with Waltz, you will get access to a digital bank account in the US.
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• Currency exchange. Exchange rates vary and in some cases, your home country may have limitations on what you can transfer. This could delay your closing date. We’ve established partnerships that make currency exchange simpler and at competitive rates.

Apply for a DSCR loan with Waltz

DSCR loans offer a unique opportunity to buy U.S. real estate without the added hurdles foreign investors often face to get financing. By focusing on the property’s income potential rather than personal financial history, these loans empower investors like you to purchase rental opportunities. 

‍Schedule a call to get started.

Frequently asked questions

Who should consider a DSCR loan?

DSCR loans are ideal for real estate investors, business owners, and foreign nationals who earn income from rental properties rather than traditional employment. These loans are designed for anyone who wants to qualify based on property cash flow instead of personal income.

What are the requirements to qualify?

Most lenders require a minimum DSCR of 1.0, meaning rental income covers total debt payments. A down payment of 25–30%, entity ownership (LLC), and proof of rental income are also typical requirements.

What is a good DSCR ratio?

A DSCR of 1.0 means the property breaks even, while 1.25 or higher indicates strong cash flow. The higher the ratio, the more attractive the property is to lenders.

What property types can you use a DSCR loan for?

DSCR loans typically apply to 1–4 unit residential investment properties, such as single-family homes, condos, townhomes, or small multi-family properties.

What’s the best way to structure a DSCR loan for a short-term rental property?

For short-term rentals like Airbnb or VRBO listings, ensure that projected rental income is supported by data (for example, through AirDNA). Lenders may use this data to confirm income potential and verify that the property meets DSCR standards.

What’s the difference between DSCR and debt yield, and when should I use both?

DSCR measures income against debt payments, while debt yield evaluates a property’s return relative to the loan amount. DSCR is most common for residential rental loans; debt yield is more often used in commercial lending for properties with complex income structures.