DSCR Loan Calculator

The property qualifies, not you

A DSCR loan is underwritten against the income of the building rather than the income of the borrower. There is no tax return, no pay stub, no employment check and no debt-to-income calculation. The lender asks one question — does the rent cover the payment — and the debt service coverage ratio is the answer expressed as a number.

That is possible because of a specific carve-out rather than lender generosity. Under Regulation Z, credit extended to acquire or maintain rental property that is not owner-occupied is deemed business-purpose credit, which puts it outside the Ability-to-Repay rule and outside TRID disclosures entirely. The same commentary sets the boundary: if you expect to occupy the property for more than fourteen days in the coming year, it is no longer non-owner-occupied and the exemption does not apply.

Plenty is still verified. Credit score drives both leverage and price, mortgage lates matter, reserves are counted in months of PITIA and must be seasoned, and the appraisal arrives with a market rent schedule that will be compared against your lease. Title is normally vested in an LLC, and the members sign a personal guarantee — which is why the common description of these loans as non-recourse is wrong.

There is no single DSCR formula. There are three.

This is where most calculators quietly go wrong, and it is worth 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, where NOI has already paid the taxes, insurance, management and repairs, so the denominator is the debt alone. A property that presents as 1.30 on the first method can present below 0.90 on the second, with not a single input changed.

Then there is the version that is simply 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-billing, add them back to the numerator too — that is the third option in the tool, and because adding the same amount above and below pulls any ratio toward 1.00, it reads lower than NOI ÷ P&I on a healthy property and higher on a failing one.

Practical consequence: ask which formula your lender uses before you conclude anything about whether a deal works. The gap between the top and bottom readings on the same property is routinely thirty points of ratio.

PITIA is larger than the mortgage payment

The denominator is principal, interest, taxes, insurance and association dues. Taxes, insurance and HOA are frequently 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 details cause most of the damage. HOA dues are mandatory in the denominator and are the most-omitted line on condos and townhouses. Property tax should be the projected post-sale reassessed figure, not the seller's current bill — in reassessment states that single substitution moves the ratio by 0.05 to 0.15 and is worst exactly where investors buy most. Insurance quoted from a stale or national-average number badly overstates coverage in Florida, Louisiana, Texas, Colorado and California after the last few years of premium escalation; get a real quote, and add flood separately if the property needs it.

Which rent number the lender is allowed to use

Not the rent you hope for. The appraiser delivers Form 1007 for a single unit or Form 1025 for two to four, giving a market rent opinion, and most lenders qualify on the lower of that figure and the signed lease. A handful take the higher, and at least one programme 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 deemed absorbed by vacancy and maintenance. That belongs to agency DTI underwriting. Importing it into a DSCR calculation understates the ratio by a third and will tell you that a perfectly financeable property does not 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 apply a haircut of roughly 20–30%. One published guideline states the rule outright as gross rents times 0.80 over PITIA. In genuine vacation markets the fallback of long-term 1007 rent can understate income by half, which is the difference between a 1.22 and a 0.86 on the same condo.

1.25, 1.20, 1.00, and what lies 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 1.25 is where a file stops being a conversation. Below 1.00 there are real programmes, but they buy the shortfall back with a higher credit score, reduced leverage in the 65–75% range, and more reserves. No-ratio programmes skip the calculation altogether at around 70% LTV with a year of reserves.

Treat the ratio as a dial rather than a gate. It prices the loan as well as approving it, and the difference between 1.05 and 1.25 shows up in the rate sheet. Note also that lenders evaluate to two decimals and do not round in your favour: 0.995 does not clear a 1.00 floor. This calculator truncates rather than rounds for exactly that reason.

Interest-only raises the ratio and postpones the problem

Interest-only is offered by nearly every DSCR lender, usually as a five or ten year period inside a thirty or forty year term, and lenders normally qualify on the interest-only payment — the denominator becomes ITIA, with principal removed. The improvement is worth roughly the principal share of the payment: commonly 0.05 to 0.20 of ratio, which is frequently the entire difference between decline and approval. A published example moves a file from 0.94 amortising to 1.08 interest-only on identical rent.

The rent did not change. Only the payment did, and it expires. A thirty year loan with ten years of interest-only amortises over the remaining twenty, so the payment at the step-up is materially higher than a plain thirty year payment would have been. That is why this calculator refuses to show the interest-only ratio on its own: you get both, side by side, with the date the second one starts mattering.

Interest-only usually costs a little leverage as well — several programmes drop the maximum LTV by around five points and require a higher score — plus a small rate add-on.

Run it backwards: the largest loan the rent supports

Checking the ratio on a loan you have already been quoted tells you whether you were declined. Inverting it tells you what to ask for, which is the more useful question while you can still change the terms.

The algebra is closed-form, not trial and error. The maximum annual debt service is your qualifying income divided by the target ratio, less 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, which is the arithmetic check this tool is written against.

One caveat decides more deals than the ratio does: your loan is capped twice. The DSCR sets one ceiling and the programme's LTV limit sets another, and you get the smaller. A 1.60 ratio buys nothing above an 80% cap. Conversely, when the LTV cap is binding, improving the rent does not increase your proceeds — only a larger down payment or a different programme does. The calculator names which of the two is holding you back.

Where the approval and the bank account disagree

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

That is why this tool keeps the lender's number and the property's number visible at the same time. The first tells you whether the loan closes. The second tells you whether you will enjoy owning it. If the two are far apart, the difference is the risk that has been handed to you rather than priced into the loan.

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