How This Calculator Works
The Debt Service Coverage Ratio is the single number DSCR lenders underwrite against:
DSCR = Gross Monthly Rent ÷ PITIA
where PITIA is Principal + Interest + Taxes + Insurance + HOA (plus mortgage insurance, if the program requires it). The ratio answers one question: for every dollar of mortgage payment, how many dollars of rent arrive?
The approval tiers
| DSCR Range | Typical Lender Outcome |
|---|---|
| Below 1.00 | Unlikely approval — the property loses money monthly; most lenders decline or force restructuring |
| 1.00 - 1.24 | Tier-2 pricing — approvable with higher rates, reduced LTV (70-75%), and 6+ months of reserves |
| 1.25 and above | Prime investor rate — best pricing, up to 80% LTV, easiest approval |
| 1.50+ | Some lenders offer rate discounts or no-reserve programs |
Why 1.25 is the magic number
A 1.25 DSCR means rent exceeds the payment by 25% — a cushion that absorbs vacancy, a missed month, or a repair without the loan going underwater. It is the threshold where DSCR lenders' risk models shift from "conditional approval with pricing penalties" to "clean approval at the best rate."
The 75% convention trap
Some lenders underwrite at 75-85% of gross rent instead of 100% to model vacancy. The same property can be a 1.30 DSCR at one lender and a 0.98 at another purely because of this convention. The calculator shows both figures so you can pre-screen against either standard.
Worked Example
A fourplex grossing $3,900/month with a $232,500 loan at 7.5%: P&I is about $1,625, taxes $420, insurance $180 — PITIA of $2,225. DSCR = $3,900 ÷ $2,225 = 1.75. That is prime-tier: expect the best rate, 80% LTV availability, and minimal reserves. If the appraiser's rent schedule instead comes in at $3,400, the DSCR drops to 1.53 — still prime, but with less cushion. This is why verifying rents before ordering an appraisal matters.
Frequently Asked Questions
What rent figure should I enter?
For a property you are buying, use the appraiser's market rent estimate (Form 1007/1025) or current signed leases — whichever your lender uses. For a refinance, use in-place leases. Optimistic "pro forma" rents will not survive underwriting.
Can I use a DSCR loan on a property I live in?
No — DSCR loans are investment-property-only. If you plan to occupy one unit, use FHA or conventional financing (see our homebuyer mortgage calculator), which also allows much lower down payments.
What if my DSCR is below 1.00?
Options: increase the down payment to shrink PITIA, negotiate the price, target a property with higher rent-to-price ratio, or accept negative cash flow consciously (rarely wise). Some lenders offer "no-ratio" or "stated DSCR" programs at significantly worse pricing.
Do DSCR loans require income documentation?
Generally no — that is the product's core feature. Expect a credit pull, bank statements for reserves, and the property's rent documentation, but no tax returns or employment verification.