DSCR
Debt-Service Coverage Ratio
What is DSCR?
A ratio comparing a property’s monthly rental income to its monthly debt service (PITIA). The cornerstone metric of investor-property lending.
DSCR stands for Debt-Service Coverage Ratio. It is the cornerstone metric of investor-property lending. The formula is simple:
A DSCR of 1.00 means the property’s rent exactly covers its mortgage payment, property taxes, hazard insurance, and any HOA/association dues. A DSCR of 1.25 means rents cover 125% of PITIA — there is positive cash flow before any vacancy or maintenance reserves. A DSCR below 1.00 means the property is “negatively levered” — out-of-pocket money is required each month to cover debt service.
For interest-only loans, the calculation may use ITIA (no principal component) since the monthly payment doesn’t include amortization during the IO period. The treatment of taxes, insurance, and HOA dues is identical to a fully-amortizing calculation.
How DSCR applies at Total Quality Lending
Total Quality Lending requires DSCR of at least 1.00 for top-tier LTV pricing on DSCR loans — up to 80% LTV at the top tier. Properties with DSCR below 1.00 can still qualify under the program’s reduced-LTV tier (660+ FICO floor; lower maximum LTV per the matrix). The ratio is calculated using the 1007 rent schedule from the appraisal or the actual lease in place — whichever is more conservative. On multi-unit DSCR loans (5–8 residential or 2–8 mixed-use), DSCR is calculated on the property’s combined eligible unit rents. Want to plug in your own numbers? Use the DSCR calculator or see the full DSCR loan requirements matrix.