DEBT-SERVICE COVERAGE RATIO (DSCR) TENANT-PAID MORTGAGE Q&A

This page answers common questions about DSCR brokers and lenders.

About the Author

Brian Wiesner, NMLS #276531
Mortgage Advisor | 21st Century Lending

With over 26 years in mortgage lending, Brian focuses on education-first guidance for homeowners, buyers, and investors throughout Upland, Claremont, Rancho Cucamonga and the Inland Empire.

All loans subject to approval. Equal Housing Lender.

Q: How do I choose the right DSCR (tenant-paid mortgage) broker in the Inland Empire?

A: DSCR loans are not one-size-fits-all, and lender guidelines vary widely.

Each DSCR lender can differ on key items such as:

• Maximum allowable units (4, 8, or even 10)

• Whether current real estate ownership is required
  (Some lenders allow borrowers who do not currently own a home to buy investment properties)

• Whether landlord experience is required

A good broker does not choose a lender first and try to force the property to fit.
Once the target property is identified, an experienced broker knows which lender the property fits best.

That’s how DSCR (tenant-paid mortgage) loans are meant to be structured.

Q: Why does local market knowledge matter for DSCR (tenant-paid mortgage) loans?

A: DSCR approvals are often driven by rent analysis, not credit scores.

A broker familiar with Upland, Claremont, and Rancho Cucamonga understands:

• How market rents compare to appraiser-supported rents

• Neighborhood demand and tenant profiles

• Whether projected rent will realistically support the loan

This local insight can determine whether a DSCR deal pencils—or doesn’t.

Q: How is the DSCR ratio calculated?

A: DSCR stands for Debt Service Coverage Ratio.

Basic formula:
Monthly Rent ÷ Monthly Mortgage Payment = DSCR

Example:

• Rent: $3,000

• Mortgage payment: $2,400

• DSCR = 1.25

Different lenders accept different ratios (1.0, 1.1, 1.2+).
Those ratios affect approval, pricing, and how much cash the investor needs to bring in.

Q: Why are DSCR loans considered business loans?

A: DSCR loans are business loans, not consumer mortgages.

Investors focus on:

• Return on investment (ROI)

• Cash invested versus cash flow

• Expected hold time

They are not asking whether the rate “feels” high or low.
They are asking whether the numbers work.

Think of DSCR loans as tenant-paid mortgages—the rent services the debt.
The only real question is: Does it pencil out?

Q: What role does a broker play in DSCR (tenant-paid mortgage) loans?

A: A DSCR broker isn’t selling a loan—they’re matching math to expectations.

Their role is to:

• Align lender guidelines with the property

• Match DSCR ratio options to cash investment goals

• Structure terms around ROI and exit strategy

It’s not emotional.
It’s numbers, risk tolerance, and return.

Q: What ownership or entity options are allowed with DSCR loans?

A: DSCR loans often allow multiple ownership structures, depending on the lender:

Common options include:

• Individual ownership

• LLC ownership

• Trust ownership

Each option affects documentation, guarantees, and insurance requirements.
A knowledgeable broker helps match the entity structure to both lender rules and long-term investment strategy.

Q: What should investors do before applying for a DSCR loan?

A: Before applying, investors should:

• Do basic neighborhood research

• Review realistic rent expectations

• Understand DSCR ratio options versus required cash investment

A good broker walks through this process step by step.
When done correctly, DSCR loans can be a powerful tool for building a portfolio of tenant-paid mortgages over time.

Have a question after reading?

If you want clarity before making a decision, I’m happy to walk through your options—no pressure.

📞 909-962-7689
📧 [email protected]