Mortgage

A mortgage is a loan secured by real property, repaid over a set term with interest. The lender holds a lien on the property and can foreclose if payments stop. A DSCR loan is a mortgage on a rental property that qualifies on the property's rent rather than the borrower's income.

Mortgages differ by how the borrower qualifies (full documentation, asset-based, or property cash flow), how they amortize (fully amortizing, interest-only, balloon), whether the rate is fixed or adjustable, and whether the lender has recourse to the borrower beyond the property.

DSCR loans sit in the non-QM segment: 30-year fixed or adjustable, often with an interest-only option, made to individuals or LLCs, usually with a prepayment penalty and a rate 0.75 to 2 points above a conventional investment loan. The rest of the mechanics are ordinary mortgage mechanics: the payment formula, escrow for taxes and insurance, and a lien recorded against the property.

Further reading: Mortgage on Wikipedia.