DSCR Loan Calculator

With a DSCR loan, the property qualifies, not you

A DSCR loan is underwritten on the building's income instead of yours. No tax return, no pay stub, no employment check, no debt-to-income calculation. The lender asks whether the rent covers the payment, and the debt service coverage ratio is that answer as a number.

Lenders can do this because of a specific carve-out in the rules, and generosity has nothing to do with it. Under Regulation Z, credit extended to buy or maintain rental property that isn't owner-occupied is deemed business-purpose credit. That puts it outside the Ability-to-Repay rule and outside TRID disclosures entirely. The same commentary draws the line: if you expect to occupy the property for more than fourteen days in the coming year, it's no longer non-owner-occupied and the exemption is gone.

Plenty still gets checked. Credit score drives both leverage and price. Late mortgage payments matter. Reserves are counted in months of PITIA and have to be seasoned. The appraisal comes with a market rent schedule that gets compared against your lease. Title normally goes in an LLC, and the members sign a personal guarantee, which is why calling these loans non-recourse is wrong.

Three DSCR formulas, and lenders don't all use the same one

Most calculators quietly get this wrong, and it matters more than any other detail on this page.

On a one-to-four unit rental, a non-QM lender computes gross qualifying rent divided by PITIA. No vacancy allowance, no management fee, no maintenance, no capital reserve. In commercial and agency multifamily, the convention is net operating income divided by annual debt service. NOI has already paid the taxes, insurance, management and repairs, so the denominator is just the debt. A property that shows 1.30 on the first method can show below 0.90 on the second, with no input changed.

Then there's the version that's plain arithmetic error: NOI divided by PITIA. It looks like a careful blend of the two, and it charges taxes and insurance twice, because NOI already subtracted them. It always understates coverage. If you want a ratio that keeps the escrowed items in the denominator without double-counting, add them back to the numerator too. That's the third option in the tool. Adding the same amount above and below pulls any ratio toward 1.00, so it reads lower than NOI ÷ P&I on a healthy property and higher on a failing one.

So ask which formula your lender uses before you decide whether a deal works. The gap between the top and bottom readings on the same property is routinely thirty points of ratio.

PITIA is bigger than the mortgage payment

The denominator is principal, interest, taxes, insurance and association dues. Taxes, insurance and HOA are often a quarter to two-fifths of the total, so a calculation built on principal and interest alone can turn a real 0.95 into a displayed 1.35.

Three lines do most of the damage. HOA dues are mandatory in the denominator and are the line people leave out most on condos and townhouses. Property tax should be the projected figure after the sale is reassessed, not the seller's current bill. In reassessment states that one swap moves the ratio by 0.05 to 0.15, and it's worst exactly where investors buy most. Insurance taken from a stale or national-average number badly overstates coverage in Florida, Louisiana, Texas, Colorado and California after the last few years of rising premiums. Get a real quote, and add flood separately if the property needs it.

Which rent number the DSCR lender is allowed to use

Not the rent you're hoping for. The appraiser delivers Form 1007 for a single unit or Form 1025 for two to four, with a market rent opinion, and most lenders qualify on the lower of that figure and the signed lease. A few take the higher, and at least one program allows the lease up to a cap of 110% of appraised market rent. If the property is vacant, the 1007 figure is used at full value.

One rule that does not apply here is Fannie Mae's requirement to count only 75% of gross rent, with the other quarter assumed lost to vacancy and maintenance. That belongs to agency DTI underwriting. Bring it into a DSCR calculation and you understate the ratio by a third, and the math will tell you a perfectly financeable property doesn't qualify.

Short-term rentals are their own case. With twelve months of platform history, gross receipts can often be used in full or close to it. Without history, lenders work from a market projection and cut it by roughly 20% to 30%. One published guideline spells the rule out as gross rents times 0.80 over PITIA. In real vacation markets, falling back on long-term 1007 rent can understate income by half. On the same condo, that's the difference between a 1.22 and a 0.86.

DSCR thresholds: 1.25, 1.20, 1.00, and below

A 1.00 floor is the most common market minimum: rent exactly covers PITIA. Best pricing and highest leverage generally start at 1.20, and at 1.25 a file stops being a negotiation. Below 1.00 there are real programs, but they make you pay for the shortfall with a higher credit score, reduced leverage in the 65% to 75% range, and more reserves. No-ratio programs skip the calculation entirely at around 70% LTV with a year of reserves.

Treat the ratio as a dial. It prices the loan as well as approving it, and the difference between 1.05 and 1.25 shows up on the rate sheet. Lenders also evaluate to two decimals and don't round in your favor: 0.995 doesn't clear a 1.00 floor. This calculator truncates instead of rounding for exactly that reason.

Interest-only raises the DSCR and postpones the problem

Nearly every DSCR lender offers interest-only, usually as a five or ten year period inside a thirty or forty year term, and lenders normally qualify you on the interest-only payment. The denominator becomes ITIA, with principal taken out. The lift is worth roughly the principal share of the payment, commonly 0.05 to 0.20 of ratio, and that's often the whole difference between decline and approval. One published example moves a file from 0.94 amortizing to 1.08 interest-only on the same rent.

The rent didn't change. Only the payment did, and that lower payment expires. A thirty year loan with ten years of interest-only amortizes over the remaining twenty, so the payment after the step-up is noticeably higher than a plain thirty year payment would have been. That's why this calculator won't show the interest-only ratio by itself. You get both, side by side, with the date the second one starts to matter.

Interest-only usually costs a little leverage too. Several programs drop the maximum LTV by around five points and require a higher score, plus a small rate add-on.

Run it backward: the largest loan the rent supports

Checking the ratio on a loan you've already been quoted tells you whether you'll be declined. Inverting it tells you what to ask for, and that's the more useful answer while you can still change the terms.

The algebra is closed-form, no trial and error. The maximum annual debt service is your qualifying income divided by the target ratio, minus the escrowed taxes, insurance and dues if they sit in the denominator. The loan is that debt service divided by twelve times the payment factor for your rate and term. Feed the answer back in and you get your target ratio to the last decimal. That's the arithmetic check this tool is built against.

One caveat decides more deals than the ratio does: your loan is capped twice. The DSCR sets one ceiling, the program's LTV limit sets another, and you get the smaller. A 1.60 ratio buys nothing above an 80% cap. And when the LTV cap is the one binding, better rent won't raise your proceeds. Only a bigger down payment or a different program will. The calculator tells you which of the two is holding you back.

Where the DSCR approval and your bank account disagree

A residential DSCR approval counts none of the things that actually eat rent. Vacancy is assumed to be zero. Management is assumed free. Maintenance and capital reserve are assumed not to exist. That's a defensible underwriting choice, since the lender holds a lien and a guarantee, not an operating stake. It also means a 1.15 approval can be a property that loses money in a year with one turnover and a water heater.

That's why this tool keeps the lender's number and the property's number on screen together. The first tells you whether the loan closes. The second tells you whether you'll like owning it. If they're far apart, the difference is risk that was handed to you instead of priced into the loan.

Income tax and depreciation don't appear anywhere here, and on purpose there's no field for either: they describe the owner's tax position, not the building. Nothing on this page is a loan offer, and every lender's overlays differ. Every figure you type stays in your browser. Nothing is uploaded, logged or stored.