🏦 DSCR Calculator
DSCR lenders qualify you on the property's income — not yours. Enter NOI and debt service to check your coverage ratio.
How DSCR Works
DSCR = Net Operating Income ÷ Annual Debt Service. It measures how many times over a property's income covers its mortgage. A DSCR of 1.25 means the property earns 25% more than the loan costs — the cushion lenders want.
Why DSCR Loans Exist
Traditional mortgages underwrite you (income, DTI, tax returns). DSCR loans underwrite the property — no personal income verification, no DTI limit, and closings in an LLC. That is why they dominate among serious rental investors. The tradeoff: higher rates (typically 1–2% above conventional) and 20–25% down payments.
Worked Example
$48,000 gross rent minus $18,000 expenses = $30,000 NOI. A $300,000 loan at 7% amortized over 30 years costs about $23,951/year. DSCR = $30,000 ÷ $23,951 = 1.25× — right at the typical lender minimum, so this deal qualifies (barely). Most lenders want 1.20–1.25×; below 1.0 the property cannot service its own debt.
How Lenders Use DSCR
Most investment-property lenders require DSCR ≥ 1.20–1.25 — the property must generate 20–25% more income than its debt costs. DSCR loans (a popular investor product) qualify you on the property's ratio alone: no personal income verification, no tax returns — which is why they price ~1–2% above conventional rates. If your DSCR falls short, the levers are: larger down payment (lowers debt service directly), buying down the rate, raising rents to market, or cutting operating expenses. Lenders also compute a global DSCR across your entire portfolio for experienced investors — one weak property can constrain the next purchase. Note that lenders use their underwriting (often 25% expense factor, market rents, actual taxes/insurance), so your pro-forma DSCR and the lender's can differ meaningfully.
Rate buydowns directly raise DSCR: every 0.5% shaved off your mortgage rate cuts debt service ~5–6%, which flows straight into the ratio. On a borderline 1.18x deal, a 2-1 buydown or an extra 5% down payment is often the difference between approval and rejection — model both scenarios before you offer.
Frequently Asked Questions (FAQs)
What DSCR do lenders require?
Most DSCR lenders require 1.20–1.25×. Some offer reduced rates at 1.5×+ and will lend down to 1.0× at higher rates. Below 1.0× (negative leverage) is rarely financeable.
Do DSCR loans check personal income?
No — that is the point. Qualification is based on the property's rent roll and a lease or appraisal rent schedule. You still need good credit (usually 660–680+) and reserves.
Can I close a DSCR loan in an LLC?
Yes, and most investors do. DSCR loans are designed for entity borrowers, unlike conventional mortgages that generally require personal ownership.
How can I improve a property's DSCR?
Raise rents, cut operating expenses, increase the down payment (smaller loan), buy down the rate, or choose a longer amortization. Every $100/month of NOI moves DSCR noticeably.
DSCR vs. conventional investment loan?
Conventional: lower rates but personal income/DTI underwriting and a 10-loan cap. DSCR: higher rates, no income docs, no loan cap, LLC-friendly. Scale investors overwhelmingly use DSCR.
Last updated: September 2026
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Last updated: September 2026