Peak Choice Capital
DSCR Calculator
Calculate your Debt Service Coverage Ratio instantly. See if your rental property qualifies for DSCR financing with our free calculator.
How to Calculate DSCR for Rental Property
What is DSCR?
The Debt Service Coverage Ratio (DSCR) is a financial metric used by lenders to assess whether a rental property generates enough income to cover its debt obligations. A DSCR of 1.0 means the property's rental income exactly covers the monthly payment (principal, interest, taxes, insurance, and HOA fees).
DSCR Formula
DSCR = Monthly Rental Income ÷ Monthly Debt Service (PITIA)
Where PITIA = Principal + Interest + Taxes + Insurance + Association fees
DSCR Requirements
- 1.0 - 1.09: Property income barely covers debt - may require larger down payment
- 1.1 - 1.24: Acceptable DSCR - property qualifies with standard terms
- 1.25+: Strong DSCR - may qualify for better rates and terms
- Below 1.0: Property doesn't generate enough income to cover debt - consider No Ratio DSCR
How to Improve Your DSCR
- Increase rental income: Raise rent to market rates or add value through renovations
- Larger down payment: Reduce the loan amount to lower monthly payments
- Lower interest rate: Shop for better rates or improve credit score
- Consider interest-only: Reduce monthly payment with interest-only periods
- Property improvements: Increase property value and rent potential
DSCR vs Traditional Loans
Unlike traditional mortgages that require W-2s, tax returns, and personal income verification, DSCR loans qualify you based solely on the property's rental income. This makes them ideal for:
- Self-employed borrowers with complex tax returns
- Real estate investors with multiple properties
- Foreign nationals investing in US real estate
- Anyone who prefers not to provide personal income documentation