{
  "id": "dscr",
  "version": "4e70301210aa",
  "status": "published",
  "name": "DSCR Loan Calculator",
  "question": "Do I qualify for a DSCR loan?",
  "summary": "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.",
  "category": "finance",
  "subcategory": "mortgage-and-real-estate",
  "url": "https://www.acalculator.org/finance/dscr-calculator",
  "markdown": "https://www.acalculator.org/finance/dscr-calculator.md",
  "kind": "function",
  "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 $1).",
  "assumptions": [
    "The DSCR uses the gross monthly rent and the full monthly PITIA, as most DSCR (rental) loan lenders do.",
    "The loan has a fixed rate; interest is charged monthly at the yearly rate ÷ 12.",
    "The DSCR on net operating income uses the rent less vacancy and all operating costs, over a year of principal and interest.",
    "Lenders set their own DSCR minimums, rates, and down payments; the defaults are examples."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "rent": {
        "title": "Monthly rent",
        "description": "The gross monthly rent the property earns, or the market rent from the appraisal.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 10000000
      },
      "price": {
        "title": "Purchase price",
        "description": "The price or value of the property.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 1000000000
      },
      "down": {
        "title": "Down payment",
        "description": "The part of the price you pay in cash; the loan is the rest.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "exclusiveMaximum": 100
      },
      "rate": {
        "title": "Interest rate",
        "description": "The fixed yearly rate of the loan. The monthly rate is this ÷ 12.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "maximum": 30
      },
      "years": {
        "title": "Loan term (years)",
        "description": "The years the loan is repaid over.",
        "type": "integer",
        "minimum": 1,
        "maximum": 40
      },
      "io": {
        "title": "Interest-only payments",
        "description": "Pay only the interest each month, as some DSCR loans allow; the lender then uses that payment.",
        "type": "boolean"
      },
      "tax": {
        "title": "Property tax",
        "description": "The property tax, per year (or per month with the switch).",
        "type": "number",
        "x-unit": "USD",
        "x-period": "year",
        "minimum": 0,
        "maximum": 100000000
      },
      "insurance": {
        "title": "Insurance",
        "description": "The property insurance premium, per year (or per month with the switch).",
        "type": "number",
        "x-unit": "USD",
        "x-period": "year",
        "minimum": 0,
        "maximum": 100000000
      },
      "hoa": {
        "title": "HOA dues",
        "description": "Homeowners or condo association dues each month.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 10000000
      },
      "target": {
        "title": "Target DSCR",
        "description": "The DSCR your lender asks for; the largest loan is figured for it.",
        "type": "number",
        "exclusiveMinimum": 0,
        "maximum": 10
      },
      "vacancy": {
        "title": "Vacancy",
        "description": "The share of the rent lost to empty months, for the DSCR on net operating income.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "maximum": 100
      },
      "costs": {
        "title": "Other operating costs",
        "description": "Repairs, management, and other running costs each month, for the DSCR on net operating income.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 10000000
      }
    }
  },
  "outputs": {
    "dscr": {
      "label": "DSCR",
      "description": "The gross monthly rent divided by the monthly PITIA: principal, interest, taxes, insurance, and HOA dues.",
      "format": "number"
    },
    "meets": {
      "label": "Target",
      "description": "Whether the DSCR reaches the target DSCR.",
      "format": "text"
    },
    "pitia": {
      "label": "Monthly PITIA",
      "description": "Principal and interest plus a month of property tax, insurance, and HOA dues.",
      "format": "money"
    },
    "payment": {
      "label": "Principal and interest",
      "description": "The monthly loan payment: interest only, or a level payment over the term.",
      "format": "money"
    },
    "loan": {
      "label": "Loan amount",
      "description": "The price minus the down payment.",
      "format": "money"
    },
    "cashFlow": {
      "label": "Rent left after PITIA",
      "description": "The monthly rent minus the PITIA, before vacancy and other running costs.",
      "format": "money"
    },
    "maxLoan": {
      "label": "Largest loan at the target",
      "description": "The loan whose PITIA makes the DSCR equal the target, at the same rate, term, taxes, insurance, and dues; 0 when those alone miss it.",
      "format": "money"
    },
    "maxPrice": {
      "label": "Price that loan buys",
      "description": "The largest loan at the target divided by the loan share of the price (1 − down payment).",
      "format": "money"
    },
    "noi": {
      "label": "Net operating income",
      "description": "A year of rent less vacancy, minus property tax, insurance, HOA dues, and other operating costs.",
      "format": "money"
    },
    "noiDscr": {
      "label": "DSCR on net operating income",
      "description": "The yearly net operating income divided by a year of principal and interest, as commercial lenders count it.",
      "format": "number"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "rent": 3000,
      "price": 400000,
      "down": 25,
      "rate": 7.5,
      "years": 30,
      "io": false,
      "tax": 4800,
      "insurance": 1800,
      "hoa": 0,
      "target": 1.25,
      "vacancy": 5,
      "costs": 300
    },
    "outputs": {
      "dscr": 1.133083049484182,
      "meets": "Below the 1.25 target",
      "pitia": 2647.6435256583377,
      "payment": 2097.6435256583377,
      "loan": 300000,
      "cashFlow": 352.3564743416624,
      "maxLoan": 264582.61053951737,
      "maxPrice": 352776.8140526898,
      "noi": 24000,
      "noiDscr": 0.9534508487910535
    },
    "text": "Renting for $3,000.00 a month against a PITIA of $2,647.64, the DSCR is 1.13."
  },
  "examples": [
    {
      "given": {
        "rent": 3000,
        "price": 400000,
        "down": 25,
        "rate": 7.5,
        "years": 30,
        "io": false,
        "tax": 4800,
        "insurance": 1800,
        "hoa": 0,
        "target": 1.25,
        "vacancy": 5,
        "costs": 300
      },
      "expect": {
        "loan": 300000,
        "payment": 2097.6435256583295,
        "pitia": 2647.6435256583295,
        "dscr": 1.1330830494841855,
        "meets": "Below the 1.25 target",
        "maxLoan": 264582.61053951835,
        "maxPrice": 352776.81405269116,
        "noi": 24000,
        "noiDscr": 0.9534508487910572
      },
      "source": "hand calculation in content.mdx; Python 3 in docs/progress/WP-49/python/dscr.py; Newfi Lending, DSCR loan requirements (DSCR = gross rent ÷ PITIA). https://newfi.com/dscr-loan-requirements/"
    },
    {
      "given": {
        "rent": 2400,
        "price": 300000,
        "down": 20,
        "rate": 6,
        "years": 30,
        "io": true,
        "tax": 3600,
        "insurance": 1200,
        "hoa": 100,
        "target": 1,
        "vacancy": 0,
        "costs": 0
      },
      "expect": {
        "loan": 240000,
        "payment": 1200,
        "pitia": 1700,
        "dscr": 1.411764705882353,
        "meets": "Meets the 1 target",
        "maxLoan": 380000,
        "maxPrice": 475000
      },
      "source": "hand calculation in content.mdx: interest only, 240,000 × 0.005 = 1,200; Newfi Lending, DSCR loan requirements (DSCR = gross rent ÷ PITIA). https://newfi.com/dscr-loan-requirements/"
    },
    {
      "given": {
        "rent": 1500,
        "price": 200000,
        "down": 25,
        "rate": 0,
        "years": 25,
        "io": false,
        "tax": 2400,
        "insurance": 1200,
        "hoa": 0,
        "target": 1.25
      },
      "expect": {
        "payment": 500,
        "pitia": 800,
        "dscr": 1.875,
        "maxLoan": 270000,
        "maxPrice": 360000,
        "noiDscr": 2.4
      },
      "source": "hand calculation in content.mdx: at 0% the payment is 150,000 ÷ 300; Newfi Lending, DSCR loan requirements (DSCR = gross rent ÷ PITIA). https://newfi.com/dscr-loan-requirements/"
    }
  ],
  "sources": [
    "Office of the Comptroller of the Currency, Comptroller’s Handbook, Commercial Real Estate Lending (debt service coverage: net operating income divided by debt service). https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/index-commercial-real-estate-lending.html",
    "Newfi Lending, DSCR loan requirements (DSCR = gross rent ÷ PITIA; typical minimums of 1.00 and up). https://newfi.com/dscr-loan-requirements/",
    "Amortized loan payment formula: S. A. Broverman, Mathematics of Investment and Credit, chapter 3."
  ],
  "related": [
    "rental-property",
    "cap-rate",
    "commercial-mortgage",
    "mortgage"
  ],
  "changelog": []
}