DSCR (Debt-Service-Coverage Ratio)
A ratio comparing a rental property's income to its debt payment. DSCR = gross monthly rent ÷ PITIA. A DSCR of 1.0 means the property exactly covers its mortgage payment.
Debt-service-coverage ratio (DSCR) is the single most important number in investor rental lending. It measures whether a property earns enough to pay its own mortgage. The formula is simple:
DSCR = Gross Monthly Rent ÷ PITIA
where PITIA is the property's full monthly obligation — Principal, Interest, Taxes, Insurance, and Association (HOA) dues.
How to read the number
- DSCR ≥ 1.25 — strong. The rent exceeds the payment by 25%+. This is the best pricing tier; lenders offer their lowest rates and highest leverage here.
- DSCR 1.00–1.24 — standard. The property covers its payment with a thin cushion. Still very financeable at normal terms.
- DSCR below 1.00 — limited. Rent does not fully cover the payment. Still possible through low-DSCR or no-ratio programs, typically at lower leverage or with extra reserves.
A worked example
A single-family rental brings in $2,400/month. Its PITIA is $2,000/month ($1,550 principal & interest + $350 taxes/insurance/HOA).
DSCR = 2,400 ÷ 2,000 = 1.20
That 1.20 lands in the standard tier — the loan works, but a lower rate or larger draw might push DSCR under 1.0, changing the program.
Why lenders use it
A DSCR loan qualifies on the asset's cash flow rather than the borrower's personal income, so there are no W-2s, pay stubs, or tax returns to verify. That makes DSCR the workhorse product for buy-and-hold and BRRRR investors who own multiple properties or write off income on their returns. Because the property's rent is the qualifier, the DSCR you can show directly controls your rate, your maximum LTV, and whether the deal qualifies at all.
Use our DSCR calculator to compute the ratio on your own numbers in seconds.
Frequently asked questions
What DSCR do I need to qualify?
Most lenders look for a DSCR of at least 1.0, and 1.25+ unlocks the best rates and leverage. Many lenders also offer low-DSCR or no-ratio programs for properties below 1.0, usually at a lower loan-to-value or with additional reserves.
Does DSCR use gross or net rent?
Standard DSCR uses gross market rent (the lease amount or appraiser's market-rent figure) divided by PITIA. It does not subtract vacancy, maintenance, or management — those are separate operating assumptions, not part of the DSCR formula itself.
Is appraised market rent or actual rent used?
Lenders typically use the lower of the in-place lease rent and the appraiser's market-rent estimate (the Form 1007 rent schedule). For a vacant property, the appraiser's market rent is used.