Free calculator
DSCR Loan Calculator
A DSCR lender does not check your income. It checks whether the property pays for itself. This DSCR calculator gives you the ratio, the largest loan that ratio supports, and the down payment that implies, so you know your position before you call a lender.
This page is for investors financing a rental. Your numbers stay in the browser.
This falls short of the 1.25 floor. You would need more rent, a bigger down payment, or lower expenses to qualify.
This falls short of the 1.25 floor. You would need more rent, a bigger down payment, or lower expenses to qualify.
Limited by DSCR at these numbers.
The most debt a 1.25 ratio supports.
80% of the purchase price.
Rent after the vacancy allowance.
What the lender divides by your payment.
Principal and interest.
The rent that would put you exactly at 1.25 on the loan above.
Estimates only, for education. DSCR underwriting counts taxes, insurance, HOA, and management, but usually not CapEx reserves, so this NOI runs higher than the one you should use to judge whether a deal is actually worth buying. Every lender writes its own guidelines. Confirm the ratio, the LTV cap, and the rate with the lender before you rely on this.
The short answer
What is DSCR and how is it calculated?
DSCR, or debt service coverage ratio, is a rental property's annual net operating income divided by its annual loan payments. A DSCR of 1.25 means the property earns 25% more than its debt costs. Most lenders require 1.20 to 1.25 to approve an investment loan.
What matters
- DSCR = annual NOI ÷ annual debt service. Above 1.00 the property covers its own loan; below it, it does not.
- Most programs want 1.20 to 1.25 and reserve their best pricing for 1.25 and up.
- Your loan is capped by whichever binds first: the DSCR floor or the lender's LTV ceiling, usually 75% to 80%.
- DSCR underwriting ignores CapEx reserves, so passing the lender's test does not mean the deal is worth owning.
The formula
How DSCR is calculated
4
Steps from market rent to the ratio
The formula is short and the detail is all in what counts as an expense.
- Start with monthly market rent and subtract a vacancy allowance, commonly 5%.
- Subtract operating expenses: property tax, insurance, HOA, a maintenance reserve, and management.
- That is monthly net operating income. Multiply by twelve for annual NOI.
- Divide annual NOI by twelve months of principal and interest. The result is your DSCR.
Note what is missing: capital expenditure reserves. A lender does not hold back money for the roof or the HVAC system, because it only needs to know the loan gets paid. You should. That is why the NOI here runs higher than the one in the rental cashflow calculator, and why passing this test is not the same as finding a good deal.
For the fuller treatment of the metric itself, see how to calculate NOI on a rental property.
The floor
What DSCR lenders require
1.25
Where most programs price their best rates
Reference
How lenders typically read a ratio. Programs differ, so treat these as the common shape rather than a rule.
| DSCR | What it means in practice |
|---|---|
| 1.25 and above | Clears most floors, best pricing, real cushion |
| 1.00 to 1.24 | Qualifies with some lenders, often at a higher rate or lower leverage |
| Below 1.00 | Property does not cover its own debt; few programs will lend |
The reason this product exists is regulatory as much as commercial. Consumer mortgages fall under the ability-to-repay rule, which the CFPB says requires lenders to document a borrower's income, assets, employment, credit history and monthly expenses. A DSCR loan is an investment-property loan underwritten on the rent instead, which is why a self-employed buyer with heavy write-offs, or an investor whose DTI has already hit Fannie Mae's 50% ceiling, can often close a DSCR loan when a conventional one is out of reach.
Credit score, cash reserves, and the property's condition still matter. Your tax return does not.
The binding cap
DSCR or LTV: which one binds
2
Caps apply to every DSCR loan
Two separate caps apply to every DSCR loan, and the calculator reports which one is actually limiting you. The distinction is worth sitting with, because the two say very different things about the deal.
If LTV binds, the property produces plenty of income and you simply need more cash. The deal is sound; your wallet is the constraint.
If DSCR binds, the property is not producing enough relative to its price. Putting more money down will get the loan approved, but it does not fix the underlying problem. It just means you are covering a weak deal with your own equity.
The rent-needed-to-qualify figure is the honest gut check. If it sits well above what comparable units actually rent for in that neighborhood, the deal does not work at this price no matter how it is financed. For context on the loan type, read DSCR loans for rental property, and compare the alternatives in how to finance a rental property.
Before you trust a number
Questions people ask first
How is DSCR calculated?
DSCR is annual net operating income divided by annual debt service. Net operating income is rent after a vacancy allowance, minus taxes, insurance, HOA, maintenance and management. A DSCR of 1.25 means the property produces 25% more income than its loan payment consumes.
What DSCR do lenders require?
Most programs set a floor of 1.20 to 1.25 and price their best rates at 1.25 and above. Some lenders go down to 1.00, meaning the property exactly covers its payment, usually in exchange for lower leverage or a higher rate. Below 1.00 few programs will lend.
Do DSCR loans check your income?
No, and that is the point. Consumer mortgages fall under the ability-to-repay rule, which requires lenders to document your income, assets and employment. DSCR loans are investment-property loans underwritten on the property's rent instead, which suits self-employed buyers and investors with several properties.
What is a good DSCR for a rental property?
Above 1.25 is comfortable, because it clears most lender floors and leaves margin for a vacancy or a repair. At 1.00 to 1.20 you qualify with some lenders but have almost no cushion. Below 1.00 the property does not cover its own debt.
Does interest-only improve DSCR?
Yes, meaningfully. Removing the principal portion lowers the payment, which raises the ratio and can qualify you for a larger loan. The trade is real: you build no equity during the interest-only period, and the payment jumps when it ends.
Why is this NOI higher than my cashflow calculator's?
DSCR underwriting counts taxes, insurance, HOA, maintenance and management, but usually not capital expenditure reserves for roofs and HVAC. That makes the lender's NOI higher than the figure you should use to judge a deal. Qualifying for a loan and owning a good deal are separate tests.
Not buying a course today
Take the twenty page guide instead.
Four ways people actually start, what each one asks of you in cash and effort, and six questions that point at the one to start with. It downloads the moment you submit.
Keep going
The rest of the numbers
- First Deal Cash PlannerHow a DSCR loan compares on required cash against FHA, conventional, and VA on the same property.
- Rental Cashflow CalculatorWhether the deal is worth owning, with the CapEx reserves a lender ignores.
- BRRRR CalculatorIf you plan to refinance out of a rehab, model the whole cycle.
- Short-Term Rental CalculatorRunning it as a short-term rental changes both the income and the risk.
- Home Affordability CalculatorThe conventional path, where your income and DTI set the ceiling.
Sources
- Consumer Financial Protection Bureau, What is the ability-to-repay rule? · Consumer mortgage lenders must document income, assets, employment, credit history and monthly expenses
- Fannie Mae Selling Guide B3-6-02, Debt-to-Income Ratios · The conventional alternative: DTI capped at 50% through Desktop Underwriter
What happens next
You have the ratio. Now you need the lender.
Week three is the banking setup, the documents, and the lender conversations that turn a ratio into a pre-approval. Weeks one, two and four are the rest of the path.