DSCR Explained

The debt-service coverage ratio (DSCR) is the single number most rental-property lenders underwrite against. The formula is simple:

DSCR = monthly rent ÷ monthly payment (PITI)

A DSCR of 1.00 means rent exactly covers the payment. 1.25 means rent covers it with a 25% cushion. Below 1.00, the property loses money every month before you even account for vacancy or repairs.

What lenders want

Most DSCR loan programs require 1.20–1.25 or higher for their best pricing. Some will lend down to 1.00 (or even 0.75) at higher rates and lower leverage. Because DSCR loans qualify the property rather than your personal income, they're the workhorse financing for self-employed investors and portfolio builders.

A quick example

A rental that brings in $2,400/month with a full PITI payment of $1,850 has a DSCR of 2,400 ÷ 1,850 = 1.30 — comfortably approvable. If the payment were $2,300, DSCR falls to 1.04: technically covering, but one vacancy away from negative.

Improving a thin DSCR

The levers are the payment side: a larger down payment, a lower rate, a longer amortization, or an interest-only period all shrink PITI and raise DSCR. On the income side, verified market rents or short/medium-term rental income (where the program allows) can help. The investment calculator color-codes your DSCR in real time as you adjust the structure — green at ≥ 1.25, yellow from 1.00–1.25, red below 1.00 — alongside cash-on-cash return.