DSCR stands for debt service coverage ratio: a property's income divided by its debt payments. A DSCR of 1.0 means the property's income exactly covers its debt; above 1.0 means it produces surplus cash flow; below 1.0 means it does not cover the payment.
How DSCR loans use it
A DSCR loan qualifies a rental property on the property's own cash flow rather than your personal income — no tax returns or W-2s. Lenders compute DSCR as the rent divided by the monthly debt (principal, interest, taxes, insurance, and any HOA, together called PITIA). Many rental programs look for a DSCR of about 1.20 to 1.25, though some allow lower with pricing adjustments.
Why investors like it
Because approval is based on the property, DSCR loans let investors scale a rental portfolio without their personal debt-to-income ratio becoming the ceiling. A strong-cash-flowing property can qualify on its own merits.