What the loan actually is
DSCR stands for debt service coverage ratio. It is a single fraction: the rent a property collects, divided by everything it costs to carry the mortgage each month. A property that collects exactly what it costs to carry scores 1.00. A property that collects more scores above 1.00 and has a cushion for vacancy, repairs and management. A property that collects less scores under 1.00, and most programs will not finance it without something changing.
That fraction replaces the income analysis you would see on a consumer mortgage. Instead of comparing your salary to your total debt, an underwriter compares the building’s rent to the building’s payment. The loan is business purpose by definition: it is made to an investor, secured by property held for rent, and documented as such in the application, the certification and the note.
DSCR Loans Illinois is a mortgage broker. We arrange and shop financing from wholesale lenders; we do not fund loans ourselves, and the lender makes the credit decision. What we bring to an Illinois file is sequencing — getting taxes, insurance and rent support confirmed before the appraisal order, because those three items are where these files actually break.
The formula, with the parts people forget
The numerator is gross monthly rent for the whole property. The denominator is the full housing payment, which includes:
- Principal and interest on the proposed loan, amortized over its term
- The monthly share of the annual property tax bill
- The monthly share of the landlord insurance premium
- HOA or association dues, when the property carries them
Two of those four lines are estimates until somebody confirms them. The tax bill is an estimate if you take it from a listing sheet; it becomes real when you pull the county’s record. The insurance premium is an estimate until an agent quotes a landlord policy on that building at replacement cost. Investors who skip those steps often discover at underwriting that their coverage number was optimistic by enough to matter.
Why the denominator is bigger than a mortgage payment
A common mistake is to compute coverage against principal and interest alone. That flatters every file. On a Chicago 2-flat with a substantial tax bill and a landlord policy on a hundred-year-old building, taxes and insurance can add a meaningful slice to the monthly number — and in some Cook County files the tax line is the second-largest item after principal and interest. Run the ratio on the full payment or you are measuring a different loan than the one you will get.
What underwriters review
Beyond coverage, a DSCR file is a risk review of the property, the borrower and the exit. In practice, the lender is looking at:
- Appraisal and rent schedule. Value, condition, unit count, market rent, and whether the property is comparable to what actually trades in that neighborhood.
- Credit and background. A guarantor credit report and, on many programs, a background check. Foreclosure, bankruptcy and criminal history each have their own seasoning rules.
- Reserves. Cash left after closing, usually expressed as a number of months of the housing payment, and higher for short-term rentals, rural property and multi-unit buildings.
- Liquidity and down payment source. Where the money came from, and whether it has been seasoned in an account.
- Entity and vesting. Which LLC or land trust takes title, who signs, and who guarantees.
- Insurance. A landlord policy in the borrowing entity’s name, with the lender named as mortgagee and coverage the lender accepts.
The Illinois lines that change the answer
Taxes are paid in arrears and assessed unevenly. Illinois property taxes arrive after the year they cover, in two installments. Cook County reassesses on a three-year cycle, which means two neighboring buildings can carry very different bills relative to their value. Underwriters know this, and many will use the higher of the current bill or a tax re-analysis. If the seller has an appeal or a certificate of error in flight, that belongs in the file, not in a text message after the appraisal.
Landlord insurance is not a homeowner quote. Older Illinois housing stock — balloon frame, knob-and-tube remnants, flat roofs on the additions, boiler heat — gets priced accordingly. A dwelling policy on a 2-flat with a real replacement-cost figure is frequently the difference between a file that clears coverage and one that does not, so we ask for the quote before the appraisal.
Foreclosure is a court process. Illinois forecloses judicially, which lengthens timelines for everyone in the capital stack. Lenders respond with reserve requirements and with appetite that varies by neighborhood and property type. It is one more reason a clean, well-documented file is worth the extra week upfront.
Two-to-four units are the local specialty. A large share of Illinois rental stock is a 2-flat, 3-flat or fourplex. Those buildings appraise differently from single-family rentals: unit mix, separate utilities, shared basements and legal conforming status all matter. Our 2-to-4 unit page goes deeper.
What does not fit this desk
Being clear about the edges saves everyone a week. We do not arrange:
- A property you or a family member will occupy — business purpose only
- Consumer or primary-residence financing of any kind
- Ground-up construction
- Loans where the property cannot legally be rented as proposed
- Files that need a stated-income or asset-depletion workaround for a consumer loan
If you are buying a building where you will live in one unit and rent the other, we cannot help, and we will say so immediately rather than shopping it.
Cost and compensation, plainly
Business-purpose pricing is set by the lender and priced to the file: property type, coverage, leverage, credit, reserves and prepayment structure all move it. We do not publish rate figures on this site because any number we printed would be wrong for your building by the time you read it. What we will do is show you the trade-offs across the programs we shop, including how broker compensation is disclosed in the documents you sign at application.
Next step
Run the numbers in the calculator with your own tax bill and insurance quote, then send the property through the application. If coverage is close, we will tell you what would have to change — equity, insurance, rent support or program — before you spend money on an appraisal.