How DSCR Is Calculated

The Debt-Service Coverage Ratio (DSCR) compares an investment property’s monthly rental income to its monthly mortgage payment (PITIA). Lenders use it to determine whether the property generates enough cash flow to support the debt.

DSCR = Monthly Rent ÷ Monthly PITIA

3-Step Calculation

1. Determine monthly rental income. Use the actual lease rate, market rent (1007 form), or 75-85% of Airbnb gross.
2. Calculate monthly PITIA. Add Principal + Interest + Taxes + Insurance + HOA/Association dues.
3. Divide rent by PITIA. The result is your DSCR. 1.0 = breakeven, 1.25+ = best pricing.

DSCR Tiers Explained

• 1.25 and above (Excellent): Best rates, lowest down payments (15-20%), top lender tier.
• 1.0-1.24 (Standard): Most DSCR programs accept this range with 20-25% down. Mid-tier pricing.
• 0.75-0.99 (Limited): Sub-1.0 DSCR programs available from specialty lenders at higher rates and 25-30% down.
• Below 0.75: Generally not financeable as DSCR. Consider larger down payment or different financing.

Example Calculations

Example 1 (Strong DSCR): $400,000 Miami SFR with $3,000/month rent and $2,400/month PITIA. DSCR = $3,000 ÷ $2,400 = 1.25. Tier-1 pricing.

Example 2 (Standard): $500,000 Tampa duplex with $3,500/month rent and $3,200/month PITIA. DSCR = 1.09. Standard tier.

Example 3 (STR boost): $350,000 Orlando vacation home, $2,000/month long-term rent vs $4,500/month Airbnb gross. With 80% STR haircut: $3,600/month qualifying. PITIA $2,400. DSCR = 1.50. Excellent.