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DSCR calculator
Debt service coverage ratio is the number a DSCR lender approves on: how many times the property's income covers its own loan payment. Enter rent, expenses, and loan terms to see your DSCR with every line shown.
Between 1.20 and 1.40. This clears the typical DSCR loan threshold with a real cushion. Verify the rent and expense assumptions against actuals before you rely on it.
DSCR is a lender's lens on the property. For the return on your own cash, use the cash-on-cash calculator.
How DSCR is calculated
net operating income = effective gross income − operating expenses
annual debt service = monthly principal & interest × 12
A DSCR loan is underwritten on the property, not on your W-2 income, which is exactly why real estate investors use it. The lender asks a single question: does the rent cover the mortgage with enough room to survive a bad month? That ratio is the DSCR, and it decides both whether you qualify and how much you can borrow.
The definition detail that trips people up
Some lenders compute debt service as principal and interest only. Others use PITIA principal, interest, taxes, insurance, and association dues, which produces a lower DSCR for the same property. This calculator uses net operating income over principal and interest, the most common institutional definition. Always confirm which one your lender applies before you assume you qualify.
What DSCR lenders look for
| DSCR | What it means | Typical lender response |
|---|---|---|
| Under 1.0 | Income does not cover the loan | Declined, or a no-ratio program at a premium |
| 1.0 – 1.19 | Covers the loan, thin cushion | Larger down payment or higher rate |
| 1.20 – 1.24 | Meets most program minimums | Standard approval on many programs |
| 1.25 – 1.49 | Comfortable coverage | Best pricing tiers open up |
| 1.50+ | Strong, resilient coverage | Easy approval; check you're not over-equitized |
DSCR questions
What DSCR do lenders require?
Most DSCR loan programs want a minimum of 1.20 to 1.25: net operating income covering the payment by 120 to 125 percent. Some go to 1.0, and a few offer no-ratio programs below that, always at a higher rate and a larger down payment.
Does DSCR include taxes and insurance?
Net operating income already subtracts taxes, insurance, and other operating costs. Whether the lender's debt-service side includes escrowed taxes and insurance (the PITIA definition) varies by program, so confirm which one they use. It can move the ratio meaningfully.
What does a DSCR below 1.0 mean?
The property's income does not cover its own loan payment, so you would feed it cash every month. Most lenders decline below 1.0, and even where it is allowed it is a warning that the deal only works if you are betting on appreciation.
Is a higher DSCR always better?
For approval and safety, yes. But a very high DSCR can mean you put down more cash than you needed to. Weigh the coverage cushion against the cash-on-cash return that extra equity could have earned in another deal.
How do I raise a deal's DSCR?
Increase net operating income (higher rent, lower expenses), or lower the debt service by putting more down, buying at a lower price, or taking a longer amortization. The cleanest lever is usually the purchase price, which is exactly the number Faro solves for.
Every calculator
Know your DSCR before the lender does.
Paste a listing and Faro pulls the rent and expenses from real comps, computes DSCR and every other ratio, and solves for the price that still qualifies.
Estimates for analysis and educational use only: not financial, investment, tax, or legal advice. Verify every number independently before making a purchase decision.