DSCR Calculator

What is DSCR and why lenders care about it

DSCR — debt-service-coverage-ratio — is the single most important number for qualifying a DSCR loan, the non-QM mortgage product that has become the standard financing for portfolio-scale real estate investors. The math is straightforward:

DSCR = Monthly Rent ÷ Monthly PITI

Where PITI is principal + interest + taxes + insurance (and HOA when applicable). A DSCR of 1.0 means rent exactly covers the mortgage payment. A DSCR of 1.25 means rent is 25% above the mortgage payment, giving the lender a cushion against vacancy and rent disruptions. Below 1.0, the property doesn't generate enough rent to cover debt service — a lender can't justify the loan on the property's own income.

Some lenders use a slightly different definition: DSCR = NOI ÷ Annual Debt Service, where NOI subtracts operating expenses (taxes, insurance, maintenance, management) from rent. This NOI-based version produces a lower DSCR than the simpler PITI version because it counts more expenses in the denominator. The calculator above uses the more common PITI-based DSCR that matches what most non-QM DSCR lenders quote.

DSCR loan rates and terms in 2026

Current 2026 market for DSCR loans:

• Interest rate: 7.5-9% on 30-year fixed, depending on credit, LTV, and DSCR. Best rates (sub-8%) typically require 720+ FICO, DSCR 1.25+, and 70-75% LTV.
• LTV: 75-80% is the standard cap. Some lenders offer 80% only when DSCR ≥ 1.25; 1.0 DSCR usually caps at 70-75% LTV.
• Credit score: 620-660 minimum, 720+ for best rates. Below 620 a handful of specialty lenders accept down to 580 with higher rates and lower LTV.
• Down payment: 20-25% typical. Cash reserves of 6-12 months of PITI are commonly required.
• Origination + fees: 1-2 points origination plus $1,500-3,500 in lender and third-party fees.
• Loan terms: 30-year fixed is most common. 5/1 and 7/1 ARM products price slightly lower if you're willing to take rate risk after the initial fixed period.
• Prepayment penalty: Many DSCR loans have step-down prepayment penalties (5-4-3-2-1% over 5 years). Verify before signing — refinance flexibility matters if rates drop.

DSCR loans vs conventional investment property loans

The choice between DSCR and conventional financing comes down to three factors:

• Income documentation: Conventional loans require tax returns, paystubs, W-2s, and full DTI documentation. DSCR loans require none of that — only the property's rent and your credit. For self-employed investors, gig-economy earners, or anyone with complex income, DSCR is materially easier.
• DTI impact: Conventional loans count toward your debt-to-income ratio for future borrowing — once you've financed 4-5 properties conventionally, your DTI usually maxes out and Fannie/Freddie underwriting refuses additional loans. DSCR loans don't affect personal DTI, so you can scale to unlimited properties.
• Cost: Conventional loans are 0.5-1.5% cheaper in rate and have lower fees. For the first 1-3 investment properties where you qualify conventionally, the rate savings is meaningful. After that, DSCR's scalability is worth the cost premium.

The typical investor financing path: conventional for the first 1-4 properties, then switch to DSCR for everything after. Some sophisticated investors run both products in parallel — conventional for the easy properties, DSCR for those that don't fit conventional underwriting (LLC ownership, larger multifamily, mixed-use, less-than-ideal credit).

How to improve your DSCR if you're short of the threshold

If the calculator shows DSCR below your lender's threshold, you have four levers to pull:

• Increase rent: Document the achievable rent — appraiser-confirmed market rents via Form 1007 (single-family) or Form 216 (multifamily) sometimes come in higher than the seller's in-place lease. A property under-rented by $100/mo can swing DSCR from 0.95 to 1.05.
• Increase down payment: Lower loan amount means lower PITI. Going from 20% down to 25% down can swing DSCR from 1.05 to 1.20 on a typical deal — often the easiest fix when you have cash available.
• Shop interest rates: Half a point lower (8.0% vs 8.5%) on a $200K loan saves ~$70/mo on PITI — meaningful for marginal deals.
• Shop lenders: Some DSCR lenders accept 1.0 minimum, others require 1.20. The same deal can pass at one lender and fail at another. Build relationships with 2-3 DSCR lenders before you need a specific loan.

Worked example: a $300,000 property at 1.25 DSCR

Consider a real-shaped deal — a $300,000 single-family rental at 25% down ($225,000 loan), 30-year DSCR loan at 8% interest, $3,600 annual property tax, $1,500 annual insurance, no HOA:

• Monthly P&I: $1,651
• Monthly tax + insurance: $300 + $125 = $425
• Total PITI: $2,076/mo
• At 1.25× DSCR target: rent needs to be at least $2,595/mo
• At 1.0× DSCR (minimum): rent needs to be at least $2,076/mo
• If actual rent is $2,400/mo: DSCR = 1.16× → passes 1.0 threshold, fails 1.25 threshold

At 1.16 DSCR, the lender would likely approve at their entry-tier rate (~8.5% rather than 7.75%), which adds ~$110/mo to PITI and pushes effective DSCR down further. The fix: either negotiate a lower purchase price (to reduce loan), increase down payment to 30%, or shop a competing lender with a 1.10 minimum.

Common DSCR mistakes investors make

• Using projected post-rehab rent on a current-condition property. Lenders use either the current lease or the appraiser's as-is market rent — not what the property could rent for after improvements. BRRRR investors need to refinance after the rehab is done and rented, not before.
• Forgetting HOA in PITI. Condo and HOA properties often have $200-800/mo HOA fees that materially affect DSCR. Many investors miss this and discover the deal doesn't qualify at closing.
• Assuming the lowest advertised rate applies. DSCR loan rate matrices vary by FICO, LTV, DSCR, property type, occupancy, and prepayment-penalty selection. Pull a rate quote on your specific scenario before underwriting — don't use the lender's headline rate.
• Underestimating insurance. Investment property insurance runs 1.5-2.5× owner-occupied rates. In high-risk markets (Florida, coastal Texas, California wildfire zones), insurance can be 3-5× higher and dramatically affect DSCR.

For the broader financing context, see our DSCR loans explained guide, the conventional vs DSCR comparison, and the BRRRR financing playbook for how DSCR fits into the BRRRR refinance step.

Frequently asked questions

What is a DSCR loan?

A DSCR loan is a non-QM investment property mortgage qualified based on the property's rental income (debt-service-coverage-ratio) rather than your personal income or tax returns. They're the standard financing for investors scaling beyond 4-5 properties or for self-employed borrowers with complex income.

What is a good DSCR ratio?

1.0 is the entry threshold (rent exactly covers PITI). 1.25 is the standard for best rates (rent 25% above PITI). 1.50+ is exceptional. Below 1.0, only a small number of specialty lenders will lend, at higher rates and lower LTV.

How much down payment is required for a DSCR loan?

20-25% standard. The higher your DSCR, the lower the down payment lenders will accept. 25-30% down is often required for marginal DSCR (1.0-1.15) or weaker credit (below 680).

Can I get a DSCR loan in an LLC?

Yes — most DSCR lenders allow LLC ownership, unlike conventional Fannie/Freddie loans which require personal ownership. This is one of the biggest advantages for investors who want asset-protection through LLC structure.

Are DSCR loan rates higher than conventional?

Yes, typically 0.5-1.5% higher. In 2026, expect DSCR rates in the 7.5-9% range vs conventional investment-property rates around 7-8%. The premium is the cost of qualifying without personal-income documentation and without affecting your DTI.

How long does DSCR loan approval take?

Typically 14-30 days from application to closing, compared to 30-45 days for conventional. The faster timeline is because there's no employment verification, no tax return review, and no income documentation.

Sources

• Fannie Mae Selling Guide B3-3.1-08 (Rental Income) and B2-1.5-02 (loan eligibility for investment property)
• Freddie Mac Single-Family Seller/Servicer Guide section 5306 (Rental Income)
• Fannie Mae Form 1007 / 216 (appraiser rent schedule) — fanniemae.com
• SFA (Structured Finance Association) Non-QM Standards (DSCR loan documentation framework)
• Mortgage Bankers Association Investor Loan Outlook (2026 H1) — rate-environment context

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