The basics
Property cash flow is central to the review
DSCR stands for debt service coverage ratio. In many investor-loan programs, lenders use this ratio to compare a property’s qualifying rental income with its required debt payment. Each lender defines qualifying income, expenses, and required ratios under its own current guidelines.
The formula
DSCR is generally calculated by dividing qualifying property income by the applicable debt obligation.
How to read it
A ratio above 1.00 generally means measured income exceeds measured debt service; 1.00 indicates they are equal.
Why investors use it
The review centers on the investment property, although credit, reserves, property condition, and other underwriting factors may still apply.
Before applying
Prepare the property story
- Property address and purchase or refinance goal
- Expected or documented rental income
- Estimated taxes, insurance, and association dues
- Requested loan amount and intended property use
- Available property and borrower documentation
- Timeline for purchase, refinance, or stabilization
DSCR programs are not all the same
Required ratios, eligible property types, minimum amounts, documentation, rates, prepayment terms, reserves, and valuation methods vary. A property that fits one lender’s program may not fit another. Review the final lender documents and ask questions before proceeding.
Explore real estate fundingPrograms, rates, terms, amounts, and timing vary by lender and applicant. All financing is subject to underwriting, approval, and current program availability.