DSCR Calculator
Calculate your Debt Service Coverage Ratio to see if your rental property qualifies for a DSCR loan.
What Is DSCR and How Do DSCR Loans Work?
The DSCR Formula
DSCR = Net Operating Income (NOI) / Annual Debt Service. NOI is your effective gross income (gross rent minus vacancy) minus all operating expenses. Annual debt service is your total annual mortgage payment (principal + interest).
Lender Thresholds
Most DSCR lenders require a minimum ratio of 1.25, meaning your property generates 25% more income than needed to cover the mortgage. A ratio below 1.0 means the property has negative cash flow before any other costs. Ratios between 1.0 and 1.25 are considered marginal — some lenders will approve at 1.0 or higher, but at worse rates.
Why Investors Use DSCR Loans
DSCR loans qualify based on the property's income rather than the borrower's personal income or employment. This makes them popular with self-employed investors, those with complex tax returns, or anyone with multiple rental properties. No W-2 or pay stubs are required.
What Counts as Operating Expenses?
Operating expenses typically include property taxes, insurance, property management fees, maintenance and repairs, HOA dues, and utilities paid by the landlord. They do not include mortgage payments (debt service) — that is calculated separately.
Tips to Improve Your DSCR
If your DSCR is too low, you can improve it by increasing rents, reducing vacancy, cutting operating expenses, making a larger down payment to lower the loan amount, or shopping for a lower interest rate. Some lenders also allow interest-only periods which increase DSCR by reducing the required payment.