acalculator

Do I qualify for a DSCR loan?

See the debt service coverage ratio a DSCR lender will work out for your rental, whether it meets the target, and the largest loan that would.

Your numbers

DSCR lenders often ask for 20% to 25% down.
An example rate, not today’s rate. Use the rate your lender quotes.
Lenders often ask for 1.00 to 1.25.
Net operating income
DSCR
1.13

Renting for $3,000.00 a month against a PITIA of $2,647.64, the DSCR is 1.13.

The rent covers PITIA

  1. The rent does not cover PITIA
  2. The rent covers PITIA
  3. The rent covers PITIA with room
Target
Below the 1.25 target
Monthly PITIA
$2,647.64
Principal and interest
$2,097.64
Loan amount
$300,000.00
Rent left after PITIA
$352.36
Largest loan at the target
$264,582.61
Price that loan buys
$352,776.81
Net operating income
$24,000.00
DSCR on net operating income
0.95

DSCR: 1.13. Renting for $3,000.00 a month against a PITIA of $2,647.64, the DSCR is 1.13.

DSCR by monthly rent

The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use

How to calculate

Computes the debt service coverage ratio (DSCR) of a rental property loan, gross rent ÷ PITIA, the largest loan that meets a target DSCR, and the DSCR on net operating income.

Example with the default inputs (Monthly rent $3,000.00, Purchase price $400,000.00, Down payment 25%, Interest rate 7.5%, Loan term (years) 30, Interest-only payments No, Property tax $4,800.00, Insurance $1,800.00, HOA dues $0.00, Target DSCR 1.25, Vacancy 5%, Other operating costs $300.00): Renting for $3,000.00 a month against a PITIA of $2,647.64, the DSCR is 1.13.

Method: DSCR = rent ÷ PITIA, with PITIA = P&I + (tax + insurance) ÷ 12 + HOA and P&I = L × r ÷ (1 − (1 + r)^−n) (or L × r when interest-only); largest loan = (rent ÷ target − (tax + insurance) ÷ 12 − HOA) ÷ (P&I per $1).

  • The DSCR uses the gross monthly rent and the full monthly PITIA, as most DSCR (rental) loan lenders do.
  • The loan has a fixed rate; interest is charged monthly at the yearly rate ÷ 12.
  • The DSCR on net operating income uses the rent less vacancy and all operating costs, over a year of principal and interest.
  • Lenders set their own DSCR minimums, rates, and down payments; the defaults are examples.

Machine-readable copies: Markdown, JSON.

Worked examples

Each example is checked against the calculator on every build.

  1. Monthly rent $3,000.00, Purchase price $400,000.00, Down payment 25%, Interest rate 7.5%, Loan term (years) 30, Interest-only payments no, Property tax $4,800.00, Insurance $1,800.00, HOA dues $0.00, Target DSCR 1.25, Vacancy 5%, Other operating costs $300.00 gives Loan amount $300,000.00, Principal and interest $2,097.64, Monthly PITIA $2,647.64, DSCR 1.133083, Target Below the 1.25 target, Largest loan at the target $264,582.61, Price that loan buys $352,776.81, Net operating income $24,000.00, DSCR on net operating income 0.953451.Source: Newfi Lending, DSCR loan requirements (DSCR = gross rent ÷ PITIA). https://newfi.com/dscr-loan-requirements/
  2. Monthly rent $2,400.00, Purchase price $300,000.00, Down payment 20%, Interest rate 6%, Loan term (years) 30, Interest-only payments yes, Property tax $3,600.00, Insurance $1,200.00, HOA dues $100.00, Target DSCR 1, Vacancy 0%, Other operating costs $0.00 gives Loan amount $240,000.00, Principal and interest $1,200.00, Monthly PITIA $1,700.00, DSCR 1.411765, Target Meets the 1 target, Largest loan at the target $380,000.00, Price that loan buys $475,000.00.Source: Newfi Lending, DSCR loan requirements (DSCR = gross rent ÷ PITIA). https://newfi.com/dscr-loan-requirements/
  3. Monthly rent $1,500.00, Purchase price $200,000.00, Down payment 25%, Interest rate 0%, Loan term (years) 25, Interest-only payments no, Property tax $2,400.00, Insurance $1,200.00, HOA dues $0.00, Target DSCR 1.25 gives Principal and interest $500.00, Monthly PITIA $800.00, DSCR 1.875, Largest loan at the target $270,000.00, Price that loan buys $360,000.00, DSCR on net operating income 2.4.Source: Newfi Lending, DSCR loan requirements (DSCR = gross rent ÷ PITIA). https://newfi.com/dscr-loan-requirements/

How it works

Write L for the loan (price × (1 − down payment)), r for the monthly rate (the yearly rate in percent ÷ 1200), and n for the months (years × 12). Tax and insurance are yearly; an amount entered per month with the switch counts as 12 times that a year. Empty HOA dues, vacancy, and other costs count as 0.

  1. Principal and interest (P&I): L × r ÷ (1 − (1 + r)^−n); at 0%, L ÷ n. With interest-only payments, L × r.
  2. PITIA: P&I + tax ÷ 12 + insurance ÷ 12 + HOA dues. There is no answer when PITIA is 0, or so small next to the rent that the DSCR has no finite value.
  3. DSCR: gross monthly rent ÷ PITIA. The page says it meets the target when the DSCR is at least the target.
  4. Rent left after PITIA: rent − PITIA.
  5. Largest loan at the target: the P&I the target allows is rent ÷ target − (tax + insurance) ÷ 12 − HOA. Divide it by the P&I per $1 of loan (r ÷ (1 − (1 + r)^−n), 1 ÷ n at 0%, or r when interest-only) to get the loan; it is 0 when that P&I is 0 or less. The price it buys is the loan ÷ (1 − down payment). Both are left out when the P&I per $1 is 0 (interest-only at 0%).
  6. Net operating income (NOI): 12 × rent × (1 − vacancy) − tax − insurance − 12 × HOA − 12 × other costs, a year.
  7. DSCR on NOI: NOI ÷ (12 × P&I), left out when P&I is 0.

Assumptions

  • The rent is the gross monthly rent (or the appraiser’s market rent) with no vacancy, as DSCR lenders use it.
  • The rate is fixed; interest is charged monthly at the yearly rate ÷ 12.
  • Lenders differ: some use a lower rent figure, add other costs, or cap the loan-to-value. The defaults are examples.

Worked examples by hand

A $400,000 rental with 25% down at 7.5% for 30 years, renting for $3,000. L = $300,000. (1 + r)^−360 = 0.106140, so P&I = 300,000 × 0.00625 ÷ (1 − 0.106140) = $2,097.64. Tax and insurance are (4,800 + 1,800) ÷ 12 = $550, so PITIA = $2,647.64 and DSCR = 3,000 ÷ 2,647.64 = 1.13: below the 1.25 target. The target allows 3,000 ÷ 1.25 − 550 = $1,850 of P&I, which carries a loan of $264,582.61 (a price of $352,776.81 at 25% down). With 5% vacancy and $300 a month of other costs, NOI = 34,200 − 6,600 − 3,600 = $24,000, and the DSCR on NOI is 24,000 ÷ 25,171.72 = 0.95.

Interest-only: $300,000 with 20% down at 6%, renting for $2,400, $100 HOA dues. L = $240,000 and the interest-only payment is 240,000 × 0.005 = $1,200. PITIA = 1,200 + 300 + 100 + 100 = $1,700, so the DSCR is 1.41: it meets the 1 target. The target allows 2,400 − 500 = $1,900 of interest, a loan of 1,900 ÷ 0.005 = $380,000 and a price of $475,000.

$200,000 with 25% down at 0% over 25 years, renting for $1,500. P&I = 150,000 ÷ 300 = $500 and PITIA = 500 + 300 = $800, so the DSCR is 1.875. The 1.25 target allows 1,200 − 300 = $900 of P&I: a loan of 900 × 300 = $270,000 and a price of $360,000. With no vacancy or other costs, NOI = 18,000 − 3,600 = $14,400, and the DSCR on NOI is 14,400 ÷ 6,000 = 2.4.

Other questions people ask

What is a DSCR loan?

A mortgage on a rental property that the lender approves on the property’s rent rather than your personal income. The key test is the debt service coverage ratio (DSCR): how many times the rent covers the monthly payment with taxes, insurance, and dues.

How is DSCR calculated for a DSCR loan?

DSCR = gross monthly rent ÷ PITIA, where PITIA is principal and interest plus a month of property tax, insurance, and HOA dues. $3,000 of rent against a PITIA of $2,647.64 is a DSCR of 1.13.

What DSCR do lenders require?

Many DSCR lenders ask for at least 1.00 (the rent covers PITIA) and give better terms at 1.20 to 1.25 or more. Some allow less with a larger down payment. Enter your lender’s target; the page shows whether you meet it.

How do I raise my DSCR?

Borrow less (a bigger down payment), get a lower rate or an interest-only payment, or find a higher rent. The page shows the largest loan that meets your target at your rate and costs: $264,582.61 in the example, so about $35,400 more down.

How is the DSCR on net operating income different?

Commercial lenders divide the net operating income (rent less vacancy and all running costs, including taxes and insurance) by a year of principal and interest. It is usually lower than the DSCR-loan ratio, because it counts vacancy and upkeep.

Are the rate and target on this page current?

No. The page shows no live rates or lender rules. The defaults are examples; use your lender’s quote and minimum DSCR.