DSCR Loan Calculator: Check Your Property's Qualification

How the DSCR calculation works

DSCR (Debt Service Coverage Ratio) measures whether a property's rental income covers its full mortgage payment. The formula is straightforward:

The DSCR Formula

DSCR = Monthly Rent ÷ Monthly PITIA

Where PITIA = Principal + Interest + Taxes + Insurance + HOA

The ratio tells you (and the lender) whether the property pays for itself. A DSCR of 1.0 means the property breaks even — rental income exactly equals the mortgage payment. Above 1.0, the property generates cash flow. Below 1.0, the property loses money each month.

How to read your DSCR result

1.25 or higher: Strong cash flow. Qualifies for best DSCR loan programs.
1.00 to 1.24: Acceptable for many DSCR lenders. Some programs require 1.20+ minimum.
Below 1.00: Property doesn't fully cover the loan payment. Limited lender options, often requires larger down payment.
Below 0.75: Typically disqualifying for standard DSCR loans.

How transaction type affects your DSCR

DSCR lenders price the three main transaction types differently because they carry different risk profiles. The same property can produce three different DSCR results depending on whether you're buying it, refinancing it without taking cash out, or refinancing with cash-out.

Purchase loans

Purchase financing typically receives the best pricing in DSCR programs. The lender is funding the original acquisition, the property has fresh comparables (the purchase price itself), and the borrower has demonstrated commitment by completing closing on a new transaction. Most programs allow up to 80% LTV on purchases.

Rate/term refinance

Rate/term refinances replace your existing loan with new financing at different terms (different rate, term length, or both) without extracting cash. These typically price about 0.125% higher than purchase loans — the rate adjustment reflects the slightly different risk profile of refinancing an existing loan. Maximum LTV is similar to purchase.

Cash-out refinance

Cash-out refinances replace your existing loan with a larger one, with the difference paid to you in cash. These price meaningfully higher (typically 0.375% above purchase rates) because lenders view extracting equity as higher risk. Maximum LTV is also lower — typically 75% versus the 80% allowed on purchase. The combination of higher rate and lower LTV cap means cash-out scenarios often produce the weakest DSCR ratios for the same property.

Current DSCR loan program parameters

Most DSCR lenders share similar program structures, with some variation. Typical parameters:

Parameter	Typical Range
Minimum DSCR	1.0 to 1.25 (varies by lender)
Maximum LTV (purchase)	75% to 80%
Maximum LTV (rate/term refi)	75% to 80%
Maximum LTV (cash-out refi)	70% to 75%
Minimum FICO	620 to 680 (varies)
Cash reserves required	3 to 12 months PITIA
Rate adjustment vs purchase: rate/term refi	~+0.125%
Rate adjustment vs purchase: cash-out refi	~+0.375%
Property types accepted	SFR, 2-4 unit, condos, sometimes STR

How to improve your DSCR

If your current scenario doesn't qualify, several adjustments can move your DSCR into qualifying range:

Increase your down payment (purchase) or reduce LTV (refi). Smaller loan = lower monthly payment = higher DSCR. Moving from 20% to 30% down typically improves DSCR by 0.10 to 0.20.
Raise rents to market rate. If your property is rented below market, adjusting to market rents (with documentation) can significantly improve DSCR. Even $200/month additional rent can move DSCR by 0.10.
Choose a longer loan term. A 30-year amortization produces lower monthly payments than a 25-year, improving DSCR. Some lenders offer 40-year terms or interest-only periods.
Find lower property taxes. Properties in lower-tax jurisdictions naturally have better DSCR math.
Wait for better rates. Even a 0.5% rate reduction can meaningfully improve DSCR on the same property.
Consider a different transaction structure. If you're refinancing, a rate/term refi typically prices better than cash-out. If you don't need the cash, taking less cash out (or none) can move your scenario from cash-out pricing to rate/term pricing.

Frequently asked questions

Why does the rate change when I switch transaction types?

DSCR lenders apply rate adjustments based on the type of transaction. Purchase loans typically get the best rates. Rate/term refinances typically add about 0.125% to the base rate. Cash-out refinances add more — typically 0.375% or higher — because extracting equity is viewed as higher risk. The exact adjustments vary by lender and market conditions. The calculator uses typical industry adjustments; your actual rates will depend on the specific lender.

Why is the max LTV lower on cash-out?

Cash-out refinances carry higher risk for lenders because borrowers are pulling equity out of the property. To compensate, lenders typically cap cash-out LTV at 75% (versus 80% for purchase or rate/term refi). This means a cash-out scenario on the same property will have a smaller loan amount than a purchase or rate/term refi at maximum leverage.

Is this calculator a guarantee of loan approval?

No. This is an educational tool that uses typical DSCR loan program parameters. Actual approval depends on the specific lender's overlays, your full credit profile, property appraisal, market conditions, and full underwriting. Use this calculator to understand likely scenarios, not as a commitment.

Why do different DSCR lenders have different requirements?

DSCR loans are non-QM (non-qualified mortgage) products, meaning lenders set their own guidelines rather than following Fannie Mae/Freddie Mac rules. Each lender has its own minimum DSCR, FICO requirements, LTV caps, and rate tiers. The variation between lenders is much larger than with conventional mortgages.

What does "PITIA" mean and why does it include all those items?

PITIA stands for Principal, Interest, Taxes, Insurance, and (HOA) Association dues. DSCR lenders use the full PITIA because that's the actual monthly carrying cost of the property — not just the principal and interest. A property might look great when you only consider P&I, but factoring in taxes and insurance can change the picture significantly.

Can DSCR loans use projected rents, or only current actual rents?

It depends on the lender and the situation. For purchase transactions, lenders typically use the appraiser's market rent estimate (Form 1007 for SFR, Form 1025 for 2-4 unit). For refinances, lenders may use actual lease income, but often apply a vacancy factor (typically 75-90% of gross rent). Short-term rental properties have their own calculation methods.

Can an LLC use a DSCR loan?

Yes — this is actually one of the major advantages of DSCR loans over conventional. Most DSCR lenders allow you to take title in an LLC's name, which provides liability protection and clean separation between personal and investment finances. Conventional loans typically require personal title.