STR DSCR loan glossary

Key STR DSCR loan terms

DSCR (debt service coverage ratio)

The property’s qualifying monthly rental income divided by its monthly housing payment (PITIA). A DSCR of 1.00 means the rent exactly covers the payment; above 1.00 leaves a cushion, below 1.00 means the rent falls short. DSCR loans qualify the property on this ratio instead of the borrower’s personal income.

DSCR calculator · DSCR loan requirements

DSCR loan

An investment-property mortgage underwritten mainly on the property’s rental income rather than the borrower’s tax returns, pay stubs or debt-to-income ratio. They are usually non-QM loans, so terms vary widely from lender to lender.

Compare STR DSCR lenders

PITIA

Principal, interest, taxes, insurance and association dues (HOA): the full monthly housing payment. It is the denominator of the DSCR. Some lenders also include items such as flood insurance or a management fee; check how each lender defines it.

See PITIA worked out in the calculator

Qualifying rental income

The monthly rent figure a lender actually uses in the DSCR. For a short-term rental it can come from booking history, a projection or long-term market rent, and it is often reduced by a haircut.

Haircut ladder

STR income haircut

The share of gross short-term rental revenue a lender leaves out when it calculates qualifying income, to allow for vacancy, cleaning, platform fees and other STR costs. A 20% haircut means 80% of gross revenue counts. Some lenders publish a fixed percentage, some cap STR income at long-term market rent, and many don’t publish a rule.

Every published haircut, side by side · Deal checker

STR projection (AirDNA and similar)

An estimate of a property’s future short-term rental revenue from a market-data provider such as AirDNA, or from an appraiser’s short-term rental analysis. Lenders that accept a projection can qualify a purchase that has no booking history yet. Projections are estimates, not guarantees, and lenders may discount them.

Lenders that accept projected STR income

Booking history (trailing 12 months)

Actual short-term rental revenue the property has earned, usually shown with platform statements (Airbnb, VRBO) or a property manager’s report. Lenders that require history typically want about 12 months; until then they may use long-term market rent instead.

How each lender treats history vs. projection

STR income method

How a lender counts short-term rental income: from a projection, from booking history only, from either one, or by using long-term market rent. For a new Airbnb purchase this is often the deciding term.

Filter lenders by income method

Form 1007 (rent schedule)

The Single-Family Comparable Rent Schedule an appraiser completes alongside the appraisal. It estimates long-term market rent from comparable rentals. Many DSCR lenders use it as the income figure, and some use it as a cap on STR income. Some lenders order an additional short-term rental analysis for STR income.

Lenders that cap STR income at market rent

Long-term market rent

What the property would rent for on a standard 12-month lease, usually taken from the appraisal’s rent schedule (Form 1007). Lenders that don’t accept STR income, or that need booking history first, often qualify the loan on this figure.

LTV (loan-to-value)

The loan amount divided by the property’s value (or purchase price, if lower), as a percentage. Down payment is 100% minus the LTV on a purchase: 80% LTV means 20% down. Lenders usually publish a separate maximum LTV for purchases and for cash-out refinances.

Lenders with high published max LTV · Match by down payment

CLTV (combined loan-to-value)

All loans secured by the property (for example a first mortgage plus a second lien or seller carry-back) divided by its value. Lenders that allow secondary financing usually set a CLTV limit alongside the LTV limit.

Cash-out refinance

A refinance that replaces the current loan with a larger one and pays the difference to the owner. Maximum LTV for cash-out is usually lower than for a purchase, and some lenders require a minimum period of ownership first (see seasoning).

Lender matcher (cash-out / refi mode)

Prepayment penalty

A fee for paying off or refinancing the loan early, common on DSCR loans. Step-down structures are written as yearly percentages, for example 5/4/3/2/1 means 5% of the balance in year one, falling each year to zero. Choosing a shorter or no penalty often means a higher rate.

Compare published prepayment options

No-ratio loan

A DSCR-style loan program that does not require the rent to cover the payment by any specific ratio. These programs usually make up for the extra risk with lower maximum LTV, higher credit requirements or a higher rate.

Lenders with no-ratio or sub-1.0 options

Sub-1.0 DSCR

A loan where the qualifying rent is less than the monthly payment (DSCR below 1.00), so the borrower covers the shortfall. Some lenders allow it, usually with tighter LTV, credit or reserve requirements.

Lenders that allow a DSCR below 1.0 · Check your DSCR

Break-even revenue

The gross annual STR revenue at which the DSCR is exactly 1.00 after the lender’s haircut: monthly PITIA × 12 ÷ (1 − haircut).

Calculator shows your break-even revenue

ADR (average daily rate)

The average rent earned per booked night: total room revenue divided by the number of nights booked. It counts only nights that were actually booked, so it says nothing on its own about how often the property is empty.

Bookings needed calculator

Occupancy rate

The share of available nights that were booked, usually shown as a percentage: booked nights divided by available nights. Multiplied by ADR and the number of available nights, it gives gross rental revenue for the period.

Bookings needed calculator

Reserves

Cash or liquid assets the borrower must still have after closing, usually stated as a number of months of PITIA. Requirements often rise with loan size, higher LTV, lower credit or more financed properties.

Seasoning

How long something has existed before a lender will rely on it. Common examples: how long you have owned a property before a cash-out refinance can use the new appraised value, how long funds have sat in your account, or how long ago a credit event such as a foreclosure happened.

Minimum credit score (FICO)

The lowest credit score a lender says it will accept for a program. The published minimum often applies only at lower LTVs; better pricing and higher leverage usually need a higher score.

Lenders with lower published credit minimums · Credit requirements overview

Minimum and maximum loan amount

The smallest and largest loan a lender will make under a program. A minimum loan can rule out lower-priced properties even when everything else fits.

Lenders with low published minimum loans

Interest-only (IO) period

A period, often the first several years, when payments cover only interest. It lowers the monthly payment and therefore raises the DSCR, but the balance doesn’t fall during that time and payments rise afterward.

Try interest-only in the calculator

First-time investor

A borrower who has not owned or managed a rental property before. Some DSCR lenders accept them on standard terms, some add requirements such as lower LTV or more reserves, and some exclude them.

Lenders that accept first-time investors

Non-QM

Short for non-qualified mortgage: loans that fall outside the federal Qualified Mortgage rules, often because income is documented differently. Most DSCR loans are non-QM business-purpose loans, which is why programs differ so much between lenders.

Direct lender, wholesale lender, broker

A direct lender funds and works with borrowers itself. A wholesale lender funds loans that come through mortgage brokers. A broker shops a borrower’s loan to several lenders. A referral source passes your details to partner lenders and is not a lender at all.

How we classify lenders

LLC vesting

Taking title to the property in a limited liability company rather than in your own name. Many DSCR lenders allow or prefer it, usually with a personal guarantee from the owners.

HMDA

The Home Mortgage Disclosure Act, which requires many lenders to report loan-level data, including note rates, to federal regulators. The public HMDA records are the basis of our real-rates pages.

Real rates by county