DSCR Calculator

What Is DSCR (Debt Service Coverage Ratio)?

DSCR measures a property's ability to cover its debt payments from rental income. It's the single most important metric DSCR lenders use to determine if you qualify for financing.

The formula is simple: DSCR = Net Operating Income / Total Debt Service

• Net Operating Income (NOI) = Gross rental income - vacancy - operating expenses
• Total Debt Service = Monthly mortgage payment + property taxes + insurance + HOA

How DSCR Affects Your Loan Terms

Your DSCR directly impacts the rates and terms you'll be offered. Here's what to expect:

How to Improve Your DSCR

If your DSCR is too low, there are several strategies to improve it:

1. Increase the down payment — A larger down payment reduces your mortgage payment, directly improving DSCR.
2. Raise rents — If the property is below market rent, factor in achievable rent increases.
3. Reduce vacancy — Better property management and marketing can reduce vacancy rates.
4. Shop for better rates — A lower interest rate means a lower mortgage payment. Compare lenders.
5. Consider a longer amortization — A 30-year amortization has lower monthly payments than 25 or 20.

DSCR for Different Property Types

Lenders may require different minimum DSCRs depending on the property type:

• Single-family rentals: 1.0 minimum, 1.25 preferred
• Multifamily (5+ units): 1.20 minimum, 1.25-1.30 preferred
• Short-term rentals (Airbnb/VRBO): 1.0-1.25, with income typically based on AirDNA or booking history
• Commercial (office, retail): 1.25 minimum, 1.30+ preferred