How to Calculate DSCR
Debt Service Coverage Ratio measures how well a property's rental income covers its mortgage payment and required reserves. Lenders use it to underwrite investment property loans without verifying borrower income.
A DSCR of 1.0 means rent exactly equals PITIA. 1.25 means rent covers 125% of PITIA — strong cash flow. Below 1.0 means the property doesn't cover its own payment from rent (still loanable on "no-ratio" programs, at higher cost and lower LTV).
How to Calculate DSCR for a Rental Property (Step by Step)
The calculator above runs these six steps automatically from eight inputs. If you'd rather do it by hand — or want to sanity-check a lender's number — this is the exact sequence:
- Establish gross monthly rent. Use the rent on the signed lease, or the appraiser's market rent (Form 1007) if the unit is vacant. For an Airbnb/VRBO, use a projected monthly revenue figure such as AirDNA's Rentalizer mid-case. Do not deduct management, vacancy, or repairs — DSCR uses gross rent.
- Work out the loan amount. Purchase price × (1 − down payment %). On a refinance, use the new loan amount you're requesting.
- Calculate monthly principal & interest. Standard amortization at your quoted rate and term. On an interest-only program the IO payment is used — unless the lender qualifies on the fully-amortizing payment (check program rules).
- Add taxes, insurance, and HOA. Annual property taxes ÷ 12, annual hazard insurance ÷ 12, and monthly association dues. Together with P&I, that's PITIA.
- Divide rent by PITIA. $3,000 rent ÷ $2,647 PITIA = 1.13 DSCR (the worked example below).
- Read the tier. Match the ratio against the pricing-tier table below — that tells you whether the file qualifies, at what max LTV, and roughly what rate band to expect.
Want the long-form version with more examples? See How to Calculate Your DSCR Ratio (With Examples).
How Is a DSCR Loan Calculated? What the Lender Actually Does
A DSCR loan is underwritten on the property, not on you. The lender doesn't calculate a debt-to-income ratio or verify your personal income. Instead the file is sized and priced in three moves:
- Qualifying rent is set. The appraisal includes a rent schedule; the lender uses the lease rent or the appraiser's market rent per its program rules. Section 8 rent counts at the voucher amount. Family-member tenants, pet rent, parking, and laundry income generally don't count.
- PITIA is computed on the proposed loan. P&I at the locked rate and term, plus taxes, insurance, and dues. Underwriting works from the projected post-purchase tax amount and a current insurance quote, not the seller's old figures — which is why a file can underwrite lower than your own spreadsheet.
- The ratio sets the tier, and the tier sets the terms. 1.25+ prices best-tier with 80% LTV available; 1.10–1.24 is standard; 1.00–1.09 is capped at 75% LTV with a 0.25–0.50% rate add; 0.75–0.99 moves to a low-DSCR program at 70% LTV; below 0.75 is no-ratio territory at 65%. FICO, reserves, and property type are layered on top of the DSCR tier.
That's why the same property can produce a different DSCR at two lenders: one may qualify an interest-only loan on the IO payment while another uses the fully-amortizing payment, and their treatment of STR income or projected taxes can differ. Full underwriting rules are in our 2026 DSCR loan requirements guide; to see who prices each tier best, see the best DSCR lenders of 2026.
DSCR Pricing Tiers
Each DSCR threshold below correlates with lender pricing. The same file gets different rates depending on where the DSCR lands.
| DSCR Ratio | Tier | Typical Pricing | Max LTV |
|---|---|---|---|
| 1.25+ | Excellent | Best-tier rates (6.50–7.50%) | 80% |
| 1.10 – 1.24 | Standard | Standard rates (7.00–8.00%) | 80% |
| 1.00 – 1.09 | Tight | +0.25–0.50% rate add | 75% |
| 0.75 – 0.99 | Sub-1.0 ("Low DSCR") | +0.75–1.00% rate add | 70% |
| < 0.75 | No-Ratio Program | +1.00–1.25% rate add | 65% |
What Counts as Rent (and What Doesn't)
- Long-term lease: Use actual rent on lease, or appraiser's market rent estimate from Form 1007 if vacant.
- Short-term rental (Airbnb/VRBO): Lenders accept AirDNA "Rentalizer" mid-case projection on most programs. Some require 12-month trailing actuals if available. STR income varies significantly by market, seasonality, and property type — get a data-driven estimate from AirDNA's Rentalizer first, enter that as the rent, then see our Airbnb & short-term rental DSCR loan program.
- Mid-term rental (30-90 day): Treated as long-term rental — use signed lease or comparable market rent.
- Section 8 / housing voucher rent: Counted at the voucher amount.
- Family member rent: Generally not counted — must be arm's-length tenant.
- Pet rent, parking fees, laundry income: Generally not counted in DSCR — only base rent.
What Counts in PITIA
- Principal & Interest (P&I): Monthly amortizing payment on the new loan. If interest-only, IO payment is used.
- Taxes (T): Annual property taxes ÷ 12. Use latest tax bill or projected post-purchase amount.
- Insurance (I): Annual hazard insurance premium ÷ 12. Some lenders also require flood, wind, or umbrella in PITIA.
- Association dues (A): HOA or condo association monthly dues. Special assessments not included.
Not in PITIA: utilities, property management fees, vacancy reserves, repairs/maintenance, capex. Those affect your real cash flow but don't enter the DSCR formula.
Worked Example
Property: $400,000 purchase, $3,000/month rent, 25% down, 7.50% rate, 30-year fixed, $4,800/year taxes, $1,800/year insurance, no HOA.
- Loan amount: $400,000 × 0.75 = $300,000
- Monthly P&I: ~$2,097 (using standard amortization)
- Monthly Taxes: $4,800 ÷ 12 = $400
- Monthly Insurance: $1,800 ÷ 12 = $150
- Monthly HOA: $0
- PITIA: $2,097 + $400 + $150 + $0 = $2,647
- DSCR: $3,000 ÷ $2,647 = 1.13
1.13 DSCR qualifies on most lender programs at 75% LTV with standard-tier pricing. Bumping rent to $3,150 (with $4,800 taxes / $1,800 insurance unchanged) would push DSCR to 1.19, near best-tier.
Common DSCR Mistakes
- Using net rent instead of gross. DSCR uses gross monthly rent — don't deduct property management or vacancy first.
- Forgetting HOA. Condos and townhomes have HOA — leaving it out inflates the DSCR by 10–30% in HOA-heavy markets.
- Using old tax amount on a property you'll re-assess. Many states reassess after a sale. Use the projected post-purchase tax amount, not the prior owner's tax.
- Using interest-only payment but underwriting against fully-amortizing. Some lenders qualify on the fully-amortizing payment even on IO loans. Check program rules.
- Ignoring insurance hikes in coastal/wildfire markets. FL, CA wildfire zones, and TX windstorm areas have seen insurance premiums double 2022→2026. Use a current quote, not a historical average.
Frequently Asked Questions
DSCR = Gross Monthly Rent ÷ PITIA (Principal + Interest + Taxes + Insurance + HOA). 1.0 means rent exactly covers payment. 1.25+ is strongest tier.
Start with gross monthly rent (lease rent, or the appraiser's Form 1007 market rent if vacant). Work out the loan amount (price minus down payment), then monthly P&I at your quoted rate and term. Add monthly taxes, insurance, and HOA to get PITIA. Divide rent by PITIA. The calculator above runs those steps from eight inputs.
No personal income or DTI. The lender takes qualifying rent (lease or appraisal rent schedule), computes PITIA on the proposed loan, and divides. The ratio sets the tier: 1.25+ is best-tier with 80% LTV available, 1.00–1.09 is capped at 75% LTV with a rate add, sub-1.0 moves to low-DSCR or no-ratio programs at 65–70% LTV. FICO, reserves, and property type are checked on top.
Most lenders require 1.00 DSCR minimum at 75% LTV. 1.10–1.20 unlocks better pricing. 1.25+ gets best-tier rates. Sub-1.0 'no-ratio' programs exist at higher cost.
Yes. PITIA includes Principal, Interest, Taxes, Insurance, and Association dues. Skipping any inflates DSCR.
Yes — math matches wholesale lender underwriting. Final qualification may also check reserves and operating expense ratio, but the DSCR number itself matches.
1.0 means break-even on PITIA. 1.25 means 25% margin. Same loan amount, but 1.25 unlocks better pricing (~0.25–0.50% lower rate) and higher LTV.
Two limits apply and the lower one wins. DSCR limit: rent ÷ target DSCR = max PITIA; subtract taxes, insurance, and HOA for max P&I; the loan that payment supports at your rate and term is the DSCR-driven maximum. LTV limit: 80% of price at 1.10+ DSCR, 75% at 1.00–1.09, 70% at 0.75–0.99, 65% below that. The Max DSCR Loan Amount tool above computes both and shows which is binding.
Yes. Enter projected monthly STR revenue as the rent — most programs accept an AirDNA Rentalizer mid-case projection; some require 12 months of trailing actuals if the property has a history. PITIA is calculated the same way.
Yes — use the Quick DSCR Ratio Check above. Enter current rent, the monthly P&I from your statement, and monthly taxes, insurance, and HOA. That's the ratio a lender sees on a rate-and-term or cash-out refinance before new terms are applied.
Related Resources
- How to Calculate Your DSCR Ratio (With Examples)
- Current DSCR Loan Rates by Tier
- Best DSCR Lenders of 2026
- 2026 DSCR Loan Requirements
- DSCR LTV Limits
- DSCR Loan Down Payment: How Much Do You Need?
- Airbnb & Short-Term Rental DSCR Loans
- Property Analyzer
- All Free Investor Tools
Calculator math uses standard amortization formulas for Principal & Interest. Final lender qualification may include additional factors (reserves, operating expense ratio, property condition). For an official quote, complete our eligibility form. DSCR Capital Partners is a brand of UTM Financial, LLC (NMLS #2591548). Equal Housing Lender.