DSCR calculator

How lenders calculate DSCR

A DSCR lender divides gross monthly rent by PITIA: principal, interest, taxes, insurance and any HOA dues. That is the whole formula. Vacancy and management costs do not appear in it.

This matters because several widely used DSCR calculators collect a vacancy rate and an operating expense percentage, present them as inputs to net operating income, and then divide by PITIA anyway. A borrower who arrives at a lender quoting the resulting number will be told a different one.

Both figures appear above. The first is what underwriting will use. The second is what your bank balance will feel.

What ratio you need

Above 1.25 is where programs price best and underwriting is most straightforward. Between 1.00 and 1.25 most programs still work, generally with slightly tighter pricing or a lower loan-to-value. Below 1.00 the rent does not cover the payment, and while some lenders will go there with more money down, the fastest way to lift the ratio is to reduce the loan amount.

Because Texas property tax runs 1.8 to 2.5 percent of value, the tax line alone can be the difference between a file that clears 1.25 and one that does not. It is worth checking the actual assessed value and any municipal utility district levy before you write an offer.

Questions we get about this

How is DSCR calculated?

Gross monthly rent divided by PITIA, meaning principal, interest, taxes, insurance and HOA. A property renting for $3,200 against a $2,747 PITIA has a DSCR of 1.16. Lenders use gross rent, not income after vacancy or expenses.

What DSCR do lenders require?

Most programs look for 1.00 to 1.25 depending on the product. Above 1.25 you generally see the best pricing. Some lenders will write below 1.00 with a larger down payment or compensating factors.

Do DSCR loans require tax returns?

No. That is the point of the product. Qualification rests on the property's rent rather than your personal income, so there are no tax returns, W-2s or personal debt-to-income calculation.

Can I close a DSCR loan in an LLC?

Yes, and most investors do. Because these are business-purpose loans on entity-titled property, they sit outside consumer mortgage rules, which is also why we can place them well beyond Texas.

How much down do I need for a DSCR loan?

Commonly 20 to 25 percent on a purchase. A larger down payment lowers the payment, which raises DSCR, so it is the usual lever when a file lands just under the threshold.