What is a DSCR loan?
DSCR stands for debt service coverage ratio. The lender divides the property's rent by its monthly housing costs, usually principal, interest, taxes, insurance and any association dues. A ratio above 1 means the rent covers those costs. Each lender sets its own minimum, and the property's value and your credit still count.
The rent figure usually comes from a lease, or from an appraiser's estimate of market rent if the unit is vacant. That's why the property, not your tax return, sits at the center of the file. Reserves, credit history and the down payment still matter.
Which consumer-loan rules don't apply?
Federal Regulation Z exempts credit extended primarily for a business or commercial purpose, and credit to a company rather than a person. The ability-to-repay rule covers only consumer loans secured by a dwelling. So a business-purpose DSCR loan may not come with the same consumer protections or disclosures as a home loan.
The exemption is in 12 CFR 1026.3 (opens in a new tab). For a rental of one to four units that the owner doesn't live in, the CFPB's official interpretation (opens in a new tab) has the lender weigh the loan's primary purpose, not treat it as business-purpose automatically. Many DSCR lenders ask you to sign a statement that the loan is for business purposes and that you won't live in the home.
What that means for you: read the note for prepayment terms, rate changes and fees, because the lender isn't required to present them on the same forms as a consumer mortgage. Ask for everything in writing.
Can a Nevada DSCR rental be a short-term rental?
Often not for an investor, especially in southern Nevada. A new City of Las Vegas short-term rental license requires the owner to live in the home, and unincorporated Clark County stopped taking short-term rental applications in 2023. Washoe County permits cover unincorporated areas only, so Reno and Sparks follow their own city rules.
It depends on where the property sits:
- City of Las Vegas: a new short-term rental license (stays under 31 days) requires the owner to live in the home, no more than three bedrooms, and set distances from other rentals and resort hotels, per the city's 2026 instructions (opens in a new tab). A rental you don't live in doesn't fit.
- Unincorporated Clark County: the county (opens in a new tab) stopped taking short-term rental applications on August 21, 2023, and operating without a license is unlawful.
- Washoe County: county permits (opens in a new tab) cover unincorporated areas only. Inside Reno or Sparks, the city's own rules apply.
More on this: Business & investment loans
