DSCR Math Guide
How to Calculate Your DSCR
The DSCR formula in plain English, with three worked examples and the short-term rental variant. No surprises when you run your numbers — this is the same math our underwriters use.
The Formula
DSCR = Monthly Gross Rents ÷ Monthly PITIA
PITIA = Principal + Interest + Taxes + Insurance + Association dues (HOA). Short-term rental variant: (Gross Rents × 0.80) ÷ PITIA — the 0.80 multiplier is a 20% expense factor.
Step-by-step
- 1
Determine the monthly rental income
For a property already on a lease, use the lease rent. For a vacant property, the appraiser pulls a Form 1007 (single-family) or 1025 (2-4 unit) market-rent schedule. When both are available, underwriting uses the LOWER of the two — the lease rent or the 1007/1025 market rent — to keep the qualification conservative. Multi-unit properties sum the rent across all units.
- 2
Calculate the monthly PITIA
PITIA stands for Principal + Interest + Taxes + Insurance + Association dues (HOA). All five components are summed at the proposed loan amount, rate, and term. Property taxes come from the most recent tax bill (or the 1004 appraisal estimate for new construction). Insurance uses the borrower's bound policy or a property-type-appropriate estimate. HOA dues are picked up from the seller's disclosure or the HOA management company's letter.
- 3
Divide the rent by PITIA
DSCR = Monthly Gross Rents ÷ Monthly PITIA. The result is a unitless ratio. A DSCR of 1.00 means the rent exactly covers the loan payment plus carrying costs. 1.20 means there's a 20% cushion. 0.85 means the rent only covers 85% of PITIA — the borrower is expected to subsidize the property each month.
- 4
Interpret your ratio
DSCR ≥ 1.00 qualifies for max LTV in our program (80% purchase at top FICO/loan tier). DSCR < 1.00 caps the LTV lower — TQL DSCR's published max for sub-1.00 ratios is 75% purchase at 700 FICO with $1M-$1.5M loan amounts. If your ratio is too low, you can fix it by putting more down (lower loan amount → lower PITIA → higher ratio), buying down the rate, or finding a property with stronger rent-to-price economics.
Three worked examples
Example 1 — Suburban SFR
$300K single-family rental, 30-year fixed
- Monthly rent
- $2,000
- Monthly PITIA
- $1,700
- DSCR
- 1.18
Qualifies
2000 ÷ 1700 = 1.176, rounds to 1.18. Clears 1.00 with margin — eligible for max LTV.
Example 2 — Duplex
$500K duplex (2 units), 30-year fixed
- Monthly rent
- $4,000
- Monthly PITIA
- $3,500
- DSCR
- 1.14
Qualifies
4000 ÷ 3500 = 1.143, rounds to 1.14. Both units' rents sum to $4,000/mo. Clears 1.00 — eligible for max multi-unit LTV.
Example 3 — Bay Area SFR
$1M Bay Area SFR, 30-year fixed
- Monthly rent
- $4,500
- Monthly PITIA
- $5,200
- DSCR
- 0.87
Does not qualify
4500 ÷ 5200 = 0.865, rounds to 0.87. Below 1.00 — caps at TQL DSCR's sub-1.00 LTV (max 75% purchase at 700 FICO + $1M-$1.5M loan), or borrower puts more down to raise the ratio.
Short-term rental variant
For Airbnb / VRBO / FlipKey properties, the DSCR formula adjusts to account for the higher operating costs of short-term rentals:
STR DSCR = (Gross Rents × 0.80) ÷ PITIA
The 0.80 multiplier is a 20% expense factor that captures cleaning, supplies, platform fees (Airbnb / VRBO), and vacancy. Use trailing-12-months gross revenue for existing STRs or AirDNA / Rabbu projections for pre-revenue properties — never a peak-month figure.
DSCR calculation — FAQs
What if my DSCR is below 1.00?
TQL DSCR still finances sub-1.00 ratios at reduced LTV — typically capped at 75% purchase with 700 FICO and a $1M-$1.5M loan amount. The cheaper fix is usually to put more money down: a smaller loan means a smaller PITIA which means a higher DSCR. Other levers are rate buy-down (lowers the interest portion of PITIA), choosing a property with stronger rent-to-price economics, or switching to an interest-only product to lower monthly PITIA.
Does HOA count in PITIA?
Yes. The A in PITIA is Association dues. Condos, planned developments, and HOA-governed single-family properties include the monthly HOA assessment in the PITIA calculation. Skip the HOA and you'll overstate your DSCR by whatever the dues are — a $400/mo HOA on a $1,700 PITIA can be the difference between qualifying and not.
How are taxes estimated for a property I haven't bought yet?
Underwriting uses the most recent property tax bill from the county. For new construction or properties with no recent bill, the 1004 appraisal estimates based on the area mill rate × purchase price. Some states (California, especially) reassess at sale — Prop-13 base + reassessment math applies, and a careful underwriter will use the reassessed number, not the seller's grandfathered tax bill.
What about short-term rental (Airbnb / VRBO) DSCR?
Short-term rental DSCR uses a different formula: (Gross Annual Revenue × 0.80) ÷ Annual PITIA, then expressed as a ratio. The 0.80 multiplier is a 20% expense factor that captures the higher operating costs of STR (cleaning, supplies, platform fees, vacancy). Gross revenue comes from AirDNA / Rabbu projections or, for existing STRs, the prior 12 months of actual booking statements.
Is DSCR seasonality factored in for STRs?
Yes, by using the trailing-12-months gross revenue (which averages high and low season) and applying the 0.80 expense factor. We don't underwrite peak-month revenue — that would overstate qualifying DSCR. For pre-revenue STR purchases, the AirDNA / Rabbu projection should already be annual (averaging seasonality), not a peak-month figure.
Does Total Quality Lending publish its DSCR formula in writing?
Yes — the DSCR formula on this page is the one used by our underwriters: Monthly Gross Rents ÷ Monthly PITIA, with the lower of lease rent or 1007/1025 market rent for the numerator and full P+I+T+I+A for the denominator. The STR variant uses gross revenue × 0.80 in the numerator.
Run your DSCR with a real underwriter
Send us your property and we’ll calculate your exact DSCR — and tell you what LTV you qualify for at today’s rates.