DSCR Calculator

DSCR stands for Debt Service Coverage Ratio. It is a metric used by lenders — especially in commercial and investment property lending — to measure whether a property's rental income is sufficient to cover its debt obligations. A DSCR above 1.0 means income exceeds debt payments.

DSCR is calculated by dividing the property's Net Operating Income (NOI) by its total debt service. For rental properties, NOI is typically the gross monthly rental income, and debt service is the total monthly PITIA (principal, interest, taxes, insurance, and association dues). A DSCR of 1.25 means the property earns 25% more than its debt payments.

Most DSCR lenders require a minimum ratio of 1.20 to 1.25, meaning the property generates at least 20–25% more income than its monthly debt service. Some lenders will accept a DSCR as low as 1.0, while others may allow below 1.0 with compensating factors like a large down payment or strong reserves.

A DSCR of 1.50 means the property generates 50% more rental income than its total debt payments each month. For example, if your PITIA is $2,000 per month, a 1.50 DSCR means the property earns $3,000 monthly. This is considered a strong ratio and makes qualifying for a DSCR loan much easier.

Most DSCR loan programs require a minimum down payment of 20% to 25% of the property purchase price. Some lenders may require more depending on the borrower's credit score, the property type, and the DSCR ratio. A larger down payment reduces the loan amount and can improve your DSCR.

Qualification requirements vary by lender, but a DSCR of 1.20 or higher is the most common threshold for approval at standard terms. A DSCR between 1.0 and 1.20 may still qualify with stricter conditions, while a DSCR below 1.0 (where expenses exceed income) typically requires additional compensating factors or a higher down payment.

You can improve your DSCR by increasing rental income (raising rents or reducing vacancy), reducing your loan amount with a larger down payment, securing a lower interest rate, or choosing a longer loan term to decrease monthly payments. Reducing discretionary expenses like HOA or finding a property with lower taxes also helps.

No — that's one of the biggest advantages of DSCR loans. Unlike conventional mortgages, DSCR loans qualify borrowers based on the property's rental income rather than personal income or employment history. This makes them popular among real estate investors, self-employed borrowers, and those with complex income structures.