What is DSCR (Debt Service Coverage Ratio)?

DSCR is a rental property's Net Operating Income (NOI) divided by its Annual Debt Service (principal + interest). A DSCR of 1.00 means the property's NOI exactly covers the mortgage; 1.20 means NOI is 20% higher than the debt service. Most DSCR lenders in the US require a minimum of 1.20 to 1.25.

How do you calculate DSCR?

DSCR = Annual Net Operating Income ÷ Annual Debt Service. NOI = Gross Rent × (1 − Vacancy %) − Operating Expenses (property tax, insurance, HOA, maintenance, management). Annual Debt Service = Monthly P&I × 12. Example: NOI of $22,800 and annual P&I of $19,000 → DSCR = 1.20.

What is a good DSCR ratio for a rental property?

Most DSCR lenders offer their best pricing at 1.25+, standard pricing at 1.20+, and "no-ratio" or lower-LTV programs down to 1.00 or below. Above 1.35 you're comfortably qualifying almost anywhere; below 1.00 the property doesn't cash-flow the debt on paper and you'll usually need more down.

How is a DSCR loan different from a conventional mortgage?

Conventional loans qualify the borrower using personal income and debt-to-income (DTI). DSCR loans qualify the property using its own rental income — no W-2s or tax returns. In exchange DSCR loans typically price 100–200 bps higher, cap LTV at 75–80%, and include prepayment penalties.

Do DSCR lenders use market rent or actual rent?

For a new purchase most lenders use the lower of market rent (per a 1007 rent schedule) and the signed lease. On a refinance they'll use the in-place rent if the unit is leased. Short-term rental income is accepted by some lenders using a 12-month AirDNA or booking history at 75–90% of gross.

Can I include short-term rental income in DSCR?

Yes, with STR-friendly DSCR lenders. They typically use trailing 12 months of Airbnb/VRBO gross revenue, discount it 10–25% for vacancy and platform fees, then treat the result as gross rent in the DSCR formula. Not all DSCR lenders allow STR — confirm before applying.

What LTV can I get with a DSCR loan?

Most DSCR programs max out at 75–80% LTV on a purchase and 70–75% on a cash-out refinance. Better DSCR ratios (1.25+) and higher credit scores (720+) unlock the top LTV tier and best rates.

How can I improve my DSCR?

Three levers: increase NOI (raise rent, cut opex), reduce debt service (bigger down payment, longer term, or an interest-only period), or change the deal (target higher-cap-rate submarkets). Interest-only lowers the annual P&I to just the interest, which is why many DSCR loans use a 10-year IO period at qualification.

DSCR loan underwriting

DSCR Calculator — Debt Service Coverage Ratio

Check whether your rental property qualifies for a DSCR loan in seconds. Enter the property numbers to see your DSCR, cash flow, and the max loan you can qualify for at a 1.00×, 1.20×, or 1.25× lender minimum.

Formula: DSCR = Annual NOI ÷ Annual Debt Service. Read the DSCR loan calculator guide for a full worked example and lender thresholds.

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Industry-standard formulas

Cap rate, CoC, NOI, RevPAR

Property label

Shown on the shared report and used in the PDF file name.

Purchase price

Down payment25%

Interest rate7.25%

Loan term

yrs

Interest-only payment

Many DSCR loans qualify at IO. Turn on to lower debt service.

Gross monthly rent

Vacancy5%

Property tax (annual)

Insurance (annual)

HOA (monthly)

Maintenance5% of rent

Management8% of rent

Lender minimum DSCR1.20

Common thresholds: 1.00 (no-ratio programs), 1.20 (standard), 1.25 (best pricing tier).

Estimates only — verify with your DSCR lender.

Example deal — edit any number to analyze your own.

Headline DSCR

1.08

Below 1.20

Below the 1.20× lender minimum — increase down payment, switch to interest-only, or raise rent.

NOI (annual)

$23,228

Annual debt service

$21,489

Monthly P&I

$1,791

Monthly cash flow

$145

Max qualifying loan

$236,457

at 1.20× DSCR

Approximate max purchase price at your down payment: $315,276.

Monthly expense breakdown

DSCR calculator FAQ

Everything US real estate investors ask about DSCR, DSCR loans, and lender qualification.

What is DSCR (Debt Service Coverage Ratio)?: DSCR is a rental property's Net Operating Income (NOI) divided by its Annual Debt Service (principal + interest). A DSCR of 1.00 means the property's NOI exactly covers the mortgage; 1.20 means NOI is 20% higher than the debt service. Most DSCR lenders in the US require a minimum of 1.20 to 1.25.
How do you calculate DSCR?: DSCR = Annual Net Operating Income ÷ Annual Debt Service. NOI = Gross Rent × (1 − Vacancy %) − Operating Expenses (property tax, insurance, HOA, maintenance, management). Annual Debt Service = Monthly P&I × 12. Example: NOI of $22,800 and annual P&I of $19,000 → DSCR = 1.20.
What is a good DSCR ratio for a rental property?: Most DSCR lenders offer their best pricing at 1.25+, standard pricing at 1.20+, and "no-ratio" or lower-LTV programs down to 1.00 or below. Above 1.35 you're comfortably qualifying almost anywhere; below 1.00 the property doesn't cash-flow the debt on paper and you'll usually need more down.
How is a DSCR loan different from a conventional mortgage?: Conventional loans qualify the borrower using personal income and debt-to-income (DTI). DSCR loans qualify the property using its own rental income — no W-2s or tax returns. In exchange DSCR loans typically price 100–200 bps higher, cap LTV at 75–80%, and include prepayment penalties.
Do DSCR lenders use market rent or actual rent?: For a new purchase most lenders use the lower of market rent (per a 1007 rent schedule) and the signed lease. On a refinance they'll use the in-place rent if the unit is leased. Short-term rental income is accepted by some lenders using a 12-month AirDNA or booking history at 75–90% of gross.
Can I include short-term rental income in DSCR?: Yes, with STR-friendly DSCR lenders. They typically use trailing 12 months of Airbnb/VRBO gross revenue, discount it 10–25% for vacancy and platform fees, then treat the result as gross rent in the DSCR formula. Not all DSCR lenders allow STR — confirm before applying.
What LTV can I get with a DSCR loan?: Most DSCR programs max out at 75–80% LTV on a purchase and 70–75% on a cash-out refinance. Better DSCR ratios (1.25+) and higher credit scores (720+) unlock the top LTV tier and best rates.
How can I improve my DSCR?: Three levers: increase NOI (raise rent, cut opex), reduce debt service (bigger down payment, longer term, or an interest-only period), or change the deal (target higher-cap-rate submarkets). Interest-only lowers the annual P&I to just the interest, which is why many DSCR loans use a 10-year IO period at qualification.

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