STR DSCR Loans: Financing a Short-Term Rental on Airbnb Income

What a DSCR loan is — and why STR is different

DSCR (Debt-Service-Coverage-Ratio) loans are business-purpose loans for non-owner-occupied investment properties. The lender compares the property’s rent to its monthly payment (PITIA — principal, interest, taxes, insurance, and any HOA); if rent ÷ PITIA clears their floor (often 1.0), the property qualifies on its own income — no W-2s, no tax returns, no personal DTI.

For a long-term rental, that rent is a signed lease. A short-term rental has no lease, so the lender uses a projection of nightly revenue instead. That single substitution is what makes STR financing different — and it’s why the city’s legality and any night cap matter so much: they change the revenue the loan is actually qualified on.

How an STR DSCR loan qualifies, step by step

1. Project the revenue — comparable nightly revenue for the bed/bath/type within a radius, trailing 12 months (or your actual operating history).
2. Apply legality — if the city caps rented nights, the projection is haircut to the capped share before anything else.
3. Compute the DSCR — cap-adjusted monthly revenue ÷ PITIA at the STR-overlay rate, at 70–75% LTV.
4. Match lenders — compare your DSCR to each STR lender’s floor and confirm they accept projected income and your property type.

The STR overlay, LTV, and down payment

STR DSCR rates run above standard DSCR — a premium for the variable, occupancy-driven income. Expect 70–75% LTV (25–30% down) on most programs; a stronger cap-adjusted DSCR and credit band unlock the higher-LTV, lower-rate tiers. The overlay is a real cost: model it in, because it raises PITIA and pressures the ratio.

STR insurance is also modeled higher than a long-term-rental landlord policy, and is part of PITIA — another haircut most back-of-the-envelope pro-formas miss.

Reserves, seasoning, and vesting

• Reserves — most programs want several months of PITIA in reserve; cash-out and no-seasoning programs want more.
• Seasoning — for a refinance, the clock is measured from the recording date, not closing. See the BRRRR section for the four seasoning paths.
• Vesting — DSCR loans are business-purpose, so title in an LLC is commonly allowed (some lenders prefer personal vesting).

Property types and exclusions

Single-family, 2–4 unit, and warrantable condos are widely accepted. Condotels and mixed-use are excluded by many programs over warrantability — a minority of STR-specialist lenders fund them. Set the property type in the engine and the match filters to lenders that actually allow it, so you don’t get a late decline.

Where it pencils — and where it doesn’t

The deal works where the cap-adjusted revenue clears a lender floor: legal, uncapped or high-cap markets, defensible comps, and a price that supports the ratio. It struggles in night-capped big cities, primary-residence-only jurisdictions, and banned markets — where the honest answer is often a mid-term-rental pivot. We’ll tell you which you’re in.